I began writing this piece on Saturday the 3rd of August. It was a "gut" feeling from the recent volatility that I saw in the market. It happened in the first week.
Rich Santelli famously says, "Every boat in the bottom of the ocean had a chart room." I guess he is a fundamentalist? I, as you may know, am a hybrid. I use technical and fundamental.
The technical saw a bigger downturn coming. The fundamentals got worse. There is no trade deal with China and none on the horizon. There is scheduled talks for September, but talk is cheap. My readers know my feeling on the matter. End any dealings with China. They are thieves, thugs and liars. Let me make a disclaimer. It is not the Chinese people, but their government. Some foreign nations dislike the US. They only deal with the CIA who are the proverbial "ugly American."
There is a big world out there. We can trade with many other nations. The Fed cut interest rates due to the known of a perceived global slowdown to which could affect the US economy. The real unknown is the failure of fiat money. Currently, there are $13 trillion in bonds in the world. These bonds are saying that your money is worth less each day and to prove it, we will pay you less than your purchase price at the end-term of the bond. As a result, we have inverted yields. This is a huge, red flag. In addition, we have the usual suspects like Brexit, debt of Italy, Spain and Greece. So, my stomach turned, but I need one more conclusive signal other than the big down day.
What We Know and Don't Know
There are always factual things that occur behind closed doors. For example, the Fed realizes that the US national debt will be unserviceable with normalized interest rates. This is not stated as a reason for rate cuts, but it is in their thinking. So, I said to my analytical side, price action in the market is a truth. If the market has at least one down day of 250 or more points, this will confirm the market is ready to rollover. It will at minimum test the December lows.
We Had It!
It happened the first week of the month. Now, consider that the market is at high evaluations. Nothing is cheap except commodities, however gold is changing that perception. Dear Reader, you don't buy gold every day or maybe ever, but you do need gasoline. The price is down which reflects a high consumer confidence. This gives truth to the lie of the Fed who says that inflation has not reached their 2% threshold. Let me pause for a moment. I'm not switching gears. This is just a reminder that the Fed does not include food or housing in their formula. Keep that phony 2% in mind when your rental lease is up. You won't find one landlord anywhere in America who says, "Inflation is under 2%. Therefore, I will only raise your rent 1%." Ha!
Other Voices
Any time that someone mentions an indicator that they use (bear) like the depressed price of commodities, another voice (bull) says with a matter-of-fact answer, it is a result of global slowing. It could change overnight. How about another conversation? The bear says the banks are lagging the market. The bull answers this is due to the low interest rate environment. Sebastian says, "The inverted yield never fails to call a problem." The bulls say that this indicator doesn't matter anymore.
You can go back-and-forth, but this is reality. In less than a week after the Fed cut interest rates, the world followed suit. The playbook of currency manipulation is front and center. It is led by China (Do I call a spade a spade?" See above) The Fed action has reverberated around the world and I expect more currency moves. This tit-for-tat, childish economic formula will reveal corporate debt in other nations that is hidden in foreign borrowing. This could effect derivatives and like Warren Buffet once called them, "Weapons of mass financial destruction." That was a time when he spoke the truth. You cannot trust him anymore. Anyway, this currency devaluations could trigger the derivative market and then as they say on Arthur Ave, "Forget about it!"
Wednesday, August 14, 2019
Wednesday, August 7, 2019
Another Reason to End the Fed
The sad truth about debates and arguments concerning government is usually that they all end with a governmental choice. Time moves on. Years later, the opposing sides are buried somewhere and the living have to deal with the outcome of their conflict. Does anyone recall those conversations? Does anyone know that the city of Mosul, Iraq sits on the west bank of the Tigris river and the ancient city of Nineveh use to sit on the east bank in the same location? Did they argue about the city name change? This is my point. There was opposition to the idea of creating a central bank in the US.
Fiat v. Gold
The founders went back-and-forth over what currency to establish in our new nation. The compromise was a central bank for one side and a strong currency backed by gold on the other. Cheap money favors borrowers. They already have some wealth, but with cheap money, they could expand and increase their holdings. Read greed. A strong currency protects citizens from inflation. It allows them to save and grow their wealth through time, knowing it has a sound foundation. It retains value. Eventually, the first citizens realized that bankers favored fiat. They did nothing for ordinary people. They voted for officials who ended the central bank.
Didn't end
The debate continued. The banks had the resources to continue the fight. A second central bank was created with a sunset law. By the way this is a great way to pen controversial issues into law. Put a time limit. See how it affects society. Good old, Andrew Jackson ended it. He ran by saying he would end the bank. The opposing party put up a pro-central banker. He lost. This is the voice of America. It gets labeled as "Populism" today. By the way, it was also called populism back in the day.
The story did not end
It laid low. It was discussed behind closed doors. It needed a moment, a crisis. It found the seeds in 1893. The nation had experienced rapid growth. Railroads crisscrossed the country. Manufacturing exploded on the backs of wage earners who were exploited. What developed was overproduction along with excess government spending. This is how it reads in history books. The real sin besides low wages and foreclosing of family farms was the banking institution and the US treasury. When citizens realized that deflationary effects from the civil war was destroying the value of present dollars, the idea of converting silver to dollars would stimulate the economy and help them meet financial obligations, basically the mortgage on the farm. This put a run on banks to redeem dollars with their silver. The banks could not cover and they got government to end the convertibility of silver for dollars. This violated the constitution. In addition, notes were no longer allowed to be used to get gold. The government did not have enough gold on hand to redeem. Together, this led to a panic, a run on banks. This led to the recession of 1893. Five hundred banks failed and citizens lost their entire life savings. There was no FDIC.
Enter 1907
This depression was caused by greed. Some ding-dong decided that he could manipulate the stock market. He got a bank to back him up. He tried to corner copper through a copper company. He failed, but he crushed the stock market and began a run on banks. Again, banks lacked enough funds to meet withdrawals. The liquidity problem was solved by John Pierpont Morgan who provided funds that ended the bank runs. Behind the scenes he got the government to give him US Steel through an acquisition. Again, banks, government and corruption are never blamed in history books. However, this time the elite bankers used the concept of a strong central fund. It was central to their argument. They said it was the source to end the problem of bank runs. They lobbied (read bought politicians) to accept their view. Another phony was in the White House. President Wilson joined their side. Just before Christmas in 1913 the devils got their way. Wilson signed the act to establish the Federal Reserve. This was even better for banking. This central bank is not part of the government. Fiat money was coming. Again, the constitution was violated, but not in so many words but more in direction. Gold would be out and fiat in. The original argument for cheap money which favors spenders and the rich over sound money which favors citizens and savers. This is the Anopaia Path. It kills the American Dream. This is the road where we find ourselves today.
Where it leads
The Fed just cut interest rates in an economy that is growing with low unemployment. If you recall their lies and BS, they stated that they would seek to normalize interest rates. They could not even get the 10-year rate to 3.75%. They realized that all the cheap money that they had provided had grown exponentially. Government debt would soon not be serviceable. Japan knows this as they use negative money to maintain face. The EU can read the tea leaves. They will play manipulation all the way down to zero. Switzerland is already there. Negative rates means that your purchase price will lose value over the life of the bond. This asset declines in value like a new car that you drive off the lot. The charts say that our 10-year note will fall to 1.31%.
Dear Reader, the government is saying that you give them your present money and in 10 years they will give you 1.31% profit. Keep that in mind when your rental lease is up and the landlord raises your rent 5% or your insurance company or your medical or gasoline, food, etc.
If I'm right and the ten year falls to test the lows, the problem could get worse. Japan, China, the EU all will manipulate their rates to maintain their export levels. This is a race to zero which is actually the real value of paper. This could cause the Fed to continue lowering interest rates and all the while, never admitting failure. It will be too late after a currency crisis to offer the opposing side to fiat and sound money that favors savers and ordinary citizens. We will all suffer. End the Fed!
Fiat v. Gold
The founders went back-and-forth over what currency to establish in our new nation. The compromise was a central bank for one side and a strong currency backed by gold on the other. Cheap money favors borrowers. They already have some wealth, but with cheap money, they could expand and increase their holdings. Read greed. A strong currency protects citizens from inflation. It allows them to save and grow their wealth through time, knowing it has a sound foundation. It retains value. Eventually, the first citizens realized that bankers favored fiat. They did nothing for ordinary people. They voted for officials who ended the central bank.
Didn't end
The debate continued. The banks had the resources to continue the fight. A second central bank was created with a sunset law. By the way this is a great way to pen controversial issues into law. Put a time limit. See how it affects society. Good old, Andrew Jackson ended it. He ran by saying he would end the bank. The opposing party put up a pro-central banker. He lost. This is the voice of America. It gets labeled as "Populism" today. By the way, it was also called populism back in the day.
The story did not end
It laid low. It was discussed behind closed doors. It needed a moment, a crisis. It found the seeds in 1893. The nation had experienced rapid growth. Railroads crisscrossed the country. Manufacturing exploded on the backs of wage earners who were exploited. What developed was overproduction along with excess government spending. This is how it reads in history books. The real sin besides low wages and foreclosing of family farms was the banking institution and the US treasury. When citizens realized that deflationary effects from the civil war was destroying the value of present dollars, the idea of converting silver to dollars would stimulate the economy and help them meet financial obligations, basically the mortgage on the farm. This put a run on banks to redeem dollars with their silver. The banks could not cover and they got government to end the convertibility of silver for dollars. This violated the constitution. In addition, notes were no longer allowed to be used to get gold. The government did not have enough gold on hand to redeem. Together, this led to a panic, a run on banks. This led to the recession of 1893. Five hundred banks failed and citizens lost their entire life savings. There was no FDIC.
Enter 1907
This depression was caused by greed. Some ding-dong decided that he could manipulate the stock market. He got a bank to back him up. He tried to corner copper through a copper company. He failed, but he crushed the stock market and began a run on banks. Again, banks lacked enough funds to meet withdrawals. The liquidity problem was solved by John Pierpont Morgan who provided funds that ended the bank runs. Behind the scenes he got the government to give him US Steel through an acquisition. Again, banks, government and corruption are never blamed in history books. However, this time the elite bankers used the concept of a strong central fund. It was central to their argument. They said it was the source to end the problem of bank runs. They lobbied (read bought politicians) to accept their view. Another phony was in the White House. President Wilson joined their side. Just before Christmas in 1913 the devils got their way. Wilson signed the act to establish the Federal Reserve. This was even better for banking. This central bank is not part of the government. Fiat money was coming. Again, the constitution was violated, but not in so many words but more in direction. Gold would be out and fiat in. The original argument for cheap money which favors spenders and the rich over sound money which favors citizens and savers. This is the Anopaia Path. It kills the American Dream. This is the road where we find ourselves today.
Where it leads
The Fed just cut interest rates in an economy that is growing with low unemployment. If you recall their lies and BS, they stated that they would seek to normalize interest rates. They could not even get the 10-year rate to 3.75%. They realized that all the cheap money that they had provided had grown exponentially. Government debt would soon not be serviceable. Japan knows this as they use negative money to maintain face. The EU can read the tea leaves. They will play manipulation all the way down to zero. Switzerland is already there. Negative rates means that your purchase price will lose value over the life of the bond. This asset declines in value like a new car that you drive off the lot. The charts say that our 10-year note will fall to 1.31%.
Dear Reader, the government is saying that you give them your present money and in 10 years they will give you 1.31% profit. Keep that in mind when your rental lease is up and the landlord raises your rent 5% or your insurance company or your medical or gasoline, food, etc.
If I'm right and the ten year falls to test the lows, the problem could get worse. Japan, China, the EU all will manipulate their rates to maintain their export levels. This is a race to zero which is actually the real value of paper. This could cause the Fed to continue lowering interest rates and all the while, never admitting failure. It will be too late after a currency crisis to offer the opposing side to fiat and sound money that favors savers and ordinary citizens. We will all suffer. End the Fed!
Wednesday, July 31, 2019
Odds and Ends: July 2019
I begin by retelling a few points made by JFL and Sebastian after hearing news that our government reached a deal to end the debt ceiling issue. Sebastian reminds us that the government uses the law to make laws that lie and deceive. For example, the Social Security Fund, along with a few other obligations are not counted in the national debt in calculating the interest due on these unfunded promises. JFL reminds us that the Federal Reserve is a private institution that was created by the lobby's for the banking industry to which its real loyalties lie. Our history shows this to be true. The public mandate from Congress is a feel good, fake cover put out by politicians. Now, the Congressional Budget Office (CBO) estimates that the deficit in the 2020 budget will add another $480 billion in interest payments. Dear Reader, this is not true. Since the government does not count certain future obligations, the interest number appears manageable when compared to the GDP of the economy. The GDP according to the government is $22 trillion. However, if true accounting methods were used, the interest payments by our government should be $1.4 trillion for 2020. People, I only used .02% in this estimate. That is a more real figure and it gets worse by the minute. I pose one question? When do we as a nation begin to pay back not just the interest, but the principal?
More Cheap Money Blues
It is not only the US government that uses cheap money to make things appear manageable, but some of the biggest corporations are hitting some dangerous debt levels. The following companies all have over $100 billion in debt obligations: Ab-InBev, AT&T, Comcast, Apple and Verizon. Do you recall in another piece where I reminded you of a study by the Bank of International Settlements (BIS) that stated one in six US corporations do not make enough money to service their operation? They keep rolling over debt with more debt to stay in business. This is for them and our government: You cannot solve a debt problem with more debt.
Race to the Bottom
This is where fiat money is directing the world. The worthless paper that is used by government machinations is finally showing its true colors. There is $13 trillion out there in negative yield bonds. Whatever the purchase amount, at the end, it will be less than the original price. We all know that there is planned obsolescence in things, now, we have it in money. End the Fed!
Gilder prediction
The futurist says without using exact words, that the entire internet has been compromised. It needs a reboot. There is no real security in its present state. There are too many hacks and malwares in the system to trust it. I think that he is right. Yesterday it was Capital One. Last year it was Marriott. The year before it was Equifax and ATMs everywhere. Bottom line: we all need cybersecurity. He does not point fingers, but since Huawei is in the news, they are one of the culprits. They are not alone and our government is at fault. Did you know that a Chinese company makes and installs every camera on US military bases? This is unbelievably stupid! Check the Clarence level of the idiots who approved this application.
To the moon, Alice
It is good to remind ourselves and the world that we can achieve almost anything, if we put our best foot forward. So, yes, Ralph, someone is on the moon even if it ain't Alice. Congratulations to us and JFK for putting it out there. By the way there are now 476 private companies in providing help in space exploration. Sadly, I must add this prediction by JFL. He said, "If there ever is another major war, the military will take control of all space activity."
Taxing Idea
This is so sad, but true. CEOs make 100x or more to the lowest employee in firms that they manage. A new tax will soon be on the ballot in San Francisco and Portland. The city will tax CEOS that fall into this wealth gap. Keep this in mind and Ray Dalio shares this view. In tumultuous times like a severe recession, civil unrest can happen. In this age of the internet this uneven wage scale could easily become a mantra to attack and loot wealthy residences. At the moment consumer confidence is high according to a study by Duke University. However, the same survey stated that among CEOs, two-thirds see a recession on the horizon. Mark Zandi reminds us that business confidence overrides consumer confidence. In a related aspect...
Chicago Fed National Activity Index
is conducted by this regional federal reserve governor. It is very thorough. It uses two binary numbers. It starts at zero and goes either up or down as pertaining to the economy. In June it came in at negative .02. They said this was positive since they expected -.03. I say this fact: this is the seventh straight month of negative results. It is not only this regional location. Nissan is cutting 12,000 jobs due to slow auto sales. They are not alone. Hewlett Packard is laying off 5,000. Tesla is dropping 3,600 and Citigroup is giving pink slips to a whopping 20,000. Ford offered weak earnings and weaker outlook. GM just closed a plant. The CEO of CXS railroad says, "He sees a freight recession." Sebastian called it. The auto industry is at decision time. Do they expand electric cars and suffer sales with old gasoline engines? They also face tariffs, new technology like AI and pricing customers out of the market. By the way, Canadian auto sales fell by 5.4% in May. This is the 15 straight month of sale declines. Now, consider that the stock market is up 20% this year and earnings are flat. Makes you wonder? In still another related aspect...
Trump and Trade= setting the stage
The president says he thinks China will stall in the latest round of trade talks because they really want to wait until after the 2020 elections and maybe get a weaker democratic president.
No Tipping
UPS just received a license to use drones for package delivery. Will they cover job losses by telling customers, "No tipping needed." And how does one refuse a package that appears damage, especially if the drone dropped it from 400 feet?
New Drug Company
Just what the US needs. Pfizer is spinning off a new drug company to issue generic drugs that they lost due to patent protection. This way when the negative results come forward, the parent company won't be liable. Freaking lawyers!
Bigger than Super Bowl
sad to write this, but gamers are growing stronger every day. There were 454 million who viewed the first video / gaming championship online. The e-sport had sold out seating to watch the live event. I know this, I won't offer my tax money to build a stadium for grown kids to do battle with video games. Peace.
More Cheap Money Blues
It is not only the US government that uses cheap money to make things appear manageable, but some of the biggest corporations are hitting some dangerous debt levels. The following companies all have over $100 billion in debt obligations: Ab-InBev, AT&T, Comcast, Apple and Verizon. Do you recall in another piece where I reminded you of a study by the Bank of International Settlements (BIS) that stated one in six US corporations do not make enough money to service their operation? They keep rolling over debt with more debt to stay in business. This is for them and our government: You cannot solve a debt problem with more debt.
Race to the Bottom
This is where fiat money is directing the world. The worthless paper that is used by government machinations is finally showing its true colors. There is $13 trillion out there in negative yield bonds. Whatever the purchase amount, at the end, it will be less than the original price. We all know that there is planned obsolescence in things, now, we have it in money. End the Fed!
Gilder prediction
The futurist says without using exact words, that the entire internet has been compromised. It needs a reboot. There is no real security in its present state. There are too many hacks and malwares in the system to trust it. I think that he is right. Yesterday it was Capital One. Last year it was Marriott. The year before it was Equifax and ATMs everywhere. Bottom line: we all need cybersecurity. He does not point fingers, but since Huawei is in the news, they are one of the culprits. They are not alone and our government is at fault. Did you know that a Chinese company makes and installs every camera on US military bases? This is unbelievably stupid! Check the Clarence level of the idiots who approved this application.
To the moon, Alice
It is good to remind ourselves and the world that we can achieve almost anything, if we put our best foot forward. So, yes, Ralph, someone is on the moon even if it ain't Alice. Congratulations to us and JFK for putting it out there. By the way there are now 476 private companies in providing help in space exploration. Sadly, I must add this prediction by JFL. He said, "If there ever is another major war, the military will take control of all space activity."
Taxing Idea
This is so sad, but true. CEOs make 100x or more to the lowest employee in firms that they manage. A new tax will soon be on the ballot in San Francisco and Portland. The city will tax CEOS that fall into this wealth gap. Keep this in mind and Ray Dalio shares this view. In tumultuous times like a severe recession, civil unrest can happen. In this age of the internet this uneven wage scale could easily become a mantra to attack and loot wealthy residences. At the moment consumer confidence is high according to a study by Duke University. However, the same survey stated that among CEOs, two-thirds see a recession on the horizon. Mark Zandi reminds us that business confidence overrides consumer confidence. In a related aspect...
Chicago Fed National Activity Index
is conducted by this regional federal reserve governor. It is very thorough. It uses two binary numbers. It starts at zero and goes either up or down as pertaining to the economy. In June it came in at negative .02. They said this was positive since they expected -.03. I say this fact: this is the seventh straight month of negative results. It is not only this regional location. Nissan is cutting 12,000 jobs due to slow auto sales. They are not alone. Hewlett Packard is laying off 5,000. Tesla is dropping 3,600 and Citigroup is giving pink slips to a whopping 20,000. Ford offered weak earnings and weaker outlook. GM just closed a plant. The CEO of CXS railroad says, "He sees a freight recession." Sebastian called it. The auto industry is at decision time. Do they expand electric cars and suffer sales with old gasoline engines? They also face tariffs, new technology like AI and pricing customers out of the market. By the way, Canadian auto sales fell by 5.4% in May. This is the 15 straight month of sale declines. Now, consider that the stock market is up 20% this year and earnings are flat. Makes you wonder? In still another related aspect...
Trump and Trade= setting the stage
The president says he thinks China will stall in the latest round of trade talks because they really want to wait until after the 2020 elections and maybe get a weaker democratic president.
No Tipping
UPS just received a license to use drones for package delivery. Will they cover job losses by telling customers, "No tipping needed." And how does one refuse a package that appears damage, especially if the drone dropped it from 400 feet?
New Drug Company
Just what the US needs. Pfizer is spinning off a new drug company to issue generic drugs that they lost due to patent protection. This way when the negative results come forward, the parent company won't be liable. Freaking lawyers!
Bigger than Super Bowl
sad to write this, but gamers are growing stronger every day. There were 454 million who viewed the first video / gaming championship online. The e-sport had sold out seating to watch the live event. I know this, I won't offer my tax money to build a stadium for grown kids to do battle with video games. Peace.
Wednesday, July 24, 2019
Inflection Point
We have reached the crucial phase in the stimulus cycle. This is something that I realized from the history of the stock market in relationship to our economy. The boom-bust business cycle is the work of Keynesian economics. Don't get me work. We have had boom-bust periods prior to his theory, but they fall under the old problems of over-capacity, tariff, trade and currency. Keynesian Theory says government should provide stimulus to cover downturns in the economy. My problem with him is there is no mention of re-paying government for the debt incurred by providing stimulus. This debt burden causes conflict in the bond market as government edges out private concerns for access to money. This is how inflation rises. Demand raises price. With interest rates rising, the price for money goes up. This is inflationary.
Enter the Fed
Modern central banks use monetary policy to stop this type of inflation. By controlling interest rates, central banks can engineer money. Lower interest rates and keep the price of money from rising. This is all well and good on paper except man is greedy. He will work the system. Of course, you can replace the word man for nations. Nations use many other types of manipulation to gain an edge. They use currency manipulation like Japan, China and EU. Nations can use tariffs like every nation in the world and the latest technique. They use regulations, however those concerns are not what is worrying the market today.
Market Today
The market is rising on the wall of worry. The market realizes that this stimulus, bull cycle is the longest on record. The evaluations are rising. Stocks are no longer cheap. The Fed entered the equation by changing policy. They began to raise rates, This caused a knee jerk response by the market. To counter this action, the new president put pressure on the Fed to lower rates, again. Then, we had conflict in the other areas of the economy, mainly tariffs and trade. On the surface all those influences added a gloomy projection to the market and to the economy. However, there was an inner feeling that a trade deal would happen and the Fed will do what the market wants, be accommodative. This battle between the bulls and bears became more evident as we enter the earnings season.
Earnings, Cap Ratio and GDP
As I say in my unpublished book, all things are connected. Earnings have been rising in relationship to the GDP since the 1990s. Historically, there is a cap ratio between earnings and GDP. The average is 80 and the highest level was 148 back in 2000. Then, we had the dot.com bust. Today, the level is 146. This is your wealth gap. The market cap is 80% higher than the norm. This is trouble in a big way. With that info, there are other, more deeply concerns behind the scenes. The banks reported solid earnings, but the transports hit bear territory in June. They could not rise to their old high while the rest of the market was hitting new highs. This discrepancy showed when CSX, a very large railroad reported a terrible quarter. They used excuses like the weather, but core business was weak. The other two main railroads reported earnings that met expectations. So, what does this mean? We have to look at the market leaders to see more evidence or we can listen to the views of two CEOs.
Morgan Stanley vs. Blackrock
The CEO of Morgan sees trouble ahead. Take your money out and wait to a better reentry point. Blackrock says, "Stay the course!" Sebastian offers this view...
*FB = is in a sideways action.
*NFLX = is down 70 points from high.
*AMZN = is trading sideways.
*GOOG = is down 150 points from high
*MSFT = is up at record levels.
Result = in conclusive.
Other Important Indicators
The semiconductor industry has pre-warned the market. They claim not to meet expectations. We have seen this movie before. CEOs sandbag and then, report better earnings. We will see shortly.
However, we do have solid evidence with a manufacturer in Fastenal. This giant firm is worth $17 billion. They had a bad quarter with an even worse outlook. Peter Boockvar at Bleakley Advisory says, "Global manufacturing is in retraction." The Shanghai Exchange plummeted last week. Next, we have the airlines. According to Boeing, the fix on the 737 Max would be done by now. The reality is maybe by January 2020? In addition, the company will take a $5 billion charge and they also said costs are rising. Not good. They are not alone, Textron, an aerospace giant, also reported a weak quarter and weaker outlook. Then, the most important commodity, oil. There is a glut and the outlook says oil firms will enter a bear market. Finally, the auto industry. Sales are steady even with prices rising. On the flip-side auto loan delinquency is rising. This is bad for bond loans and the economy in general. Many of the above issues has seen the transports fall steeply from its high. This poses a conflict in Dow Theory which requires both indexes to rise concurrently. Adding the pluses and minuses leads to the next point which has Sebastian siding with Morgan Stanley.
Bank of International Settlements(BIS)
They reported that corporations in the US have added $9 trillion in debt. They estimate that one in six companies are walking dead or zombies. A zombie corporation is one that does not meet expenses with its budget. They borrow cheap money and banks lend in this low interest environment. This is how they stay in business. It is blood for Dracula CEOs. If one derivative or missed payment happens, this horror film will burst on the scene. By the way, China is an empire of zombie firms. Anyway, banks realize that these firms could be toxic. They bundle these loans into collateralized obligations(CLOs). They are presented as high-yield investments. Pension funds, hedge funds and mutual buy them.
Covenant lite
For bond holders it means no protection. After bankruptcy, you get next to nothing. Case in point: Last Friday, 4L Technologies dived. Moody's says it will default. This is what the BIS study refers too. This is spreading the disease. This is repeating the sins of 2008. Now, those high-yield
junk bonds are showing up in the yield curve in the most dreaded fashion: the inverted yield. If banks get nervous like with the Fed tightening, they will stop lending. This will kill the zombie firms. Banks are first in line for assets, but bond holders get screwed. This destroys lending and bonds which causes layoffs and then, a recession. Maybe this is the real reason why the Fed is indicating another change in monetary policy. Back to rate cuts. Back to cheap money. Eventually, this leads to inflation. Bottom line: If you want to be able to afford to go to the movies to see this horror film, get some gold.
Enter the Fed
Modern central banks use monetary policy to stop this type of inflation. By controlling interest rates, central banks can engineer money. Lower interest rates and keep the price of money from rising. This is all well and good on paper except man is greedy. He will work the system. Of course, you can replace the word man for nations. Nations use many other types of manipulation to gain an edge. They use currency manipulation like Japan, China and EU. Nations can use tariffs like every nation in the world and the latest technique. They use regulations, however those concerns are not what is worrying the market today.
Market Today
The market is rising on the wall of worry. The market realizes that this stimulus, bull cycle is the longest on record. The evaluations are rising. Stocks are no longer cheap. The Fed entered the equation by changing policy. They began to raise rates, This caused a knee jerk response by the market. To counter this action, the new president put pressure on the Fed to lower rates, again. Then, we had conflict in the other areas of the economy, mainly tariffs and trade. On the surface all those influences added a gloomy projection to the market and to the economy. However, there was an inner feeling that a trade deal would happen and the Fed will do what the market wants, be accommodative. This battle between the bulls and bears became more evident as we enter the earnings season.
Earnings, Cap Ratio and GDP
As I say in my unpublished book, all things are connected. Earnings have been rising in relationship to the GDP since the 1990s. Historically, there is a cap ratio between earnings and GDP. The average is 80 and the highest level was 148 back in 2000. Then, we had the dot.com bust. Today, the level is 146. This is your wealth gap. The market cap is 80% higher than the norm. This is trouble in a big way. With that info, there are other, more deeply concerns behind the scenes. The banks reported solid earnings, but the transports hit bear territory in June. They could not rise to their old high while the rest of the market was hitting new highs. This discrepancy showed when CSX, a very large railroad reported a terrible quarter. They used excuses like the weather, but core business was weak. The other two main railroads reported earnings that met expectations. So, what does this mean? We have to look at the market leaders to see more evidence or we can listen to the views of two CEOs.
Morgan Stanley vs. Blackrock
The CEO of Morgan sees trouble ahead. Take your money out and wait to a better reentry point. Blackrock says, "Stay the course!" Sebastian offers this view...
*FB = is in a sideways action.
*NFLX = is down 70 points from high.
*AMZN = is trading sideways.
*GOOG = is down 150 points from high
*MSFT = is up at record levels.
Result = in conclusive.
Other Important Indicators
The semiconductor industry has pre-warned the market. They claim not to meet expectations. We have seen this movie before. CEOs sandbag and then, report better earnings. We will see shortly.
However, we do have solid evidence with a manufacturer in Fastenal. This giant firm is worth $17 billion. They had a bad quarter with an even worse outlook. Peter Boockvar at Bleakley Advisory says, "Global manufacturing is in retraction." The Shanghai Exchange plummeted last week. Next, we have the airlines. According to Boeing, the fix on the 737 Max would be done by now. The reality is maybe by January 2020? In addition, the company will take a $5 billion charge and they also said costs are rising. Not good. They are not alone, Textron, an aerospace giant, also reported a weak quarter and weaker outlook. Then, the most important commodity, oil. There is a glut and the outlook says oil firms will enter a bear market. Finally, the auto industry. Sales are steady even with prices rising. On the flip-side auto loan delinquency is rising. This is bad for bond loans and the economy in general. Many of the above issues has seen the transports fall steeply from its high. This poses a conflict in Dow Theory which requires both indexes to rise concurrently. Adding the pluses and minuses leads to the next point which has Sebastian siding with Morgan Stanley.
Bank of International Settlements(BIS)
They reported that corporations in the US have added $9 trillion in debt. They estimate that one in six companies are walking dead or zombies. A zombie corporation is one that does not meet expenses with its budget. They borrow cheap money and banks lend in this low interest environment. This is how they stay in business. It is blood for Dracula CEOs. If one derivative or missed payment happens, this horror film will burst on the scene. By the way, China is an empire of zombie firms. Anyway, banks realize that these firms could be toxic. They bundle these loans into collateralized obligations(CLOs). They are presented as high-yield investments. Pension funds, hedge funds and mutual buy them.
Covenant lite
For bond holders it means no protection. After bankruptcy, you get next to nothing. Case in point: Last Friday, 4L Technologies dived. Moody's says it will default. This is what the BIS study refers too. This is spreading the disease. This is repeating the sins of 2008. Now, those high-yield
junk bonds are showing up in the yield curve in the most dreaded fashion: the inverted yield. If banks get nervous like with the Fed tightening, they will stop lending. This will kill the zombie firms. Banks are first in line for assets, but bond holders get screwed. This destroys lending and bonds which causes layoffs and then, a recession. Maybe this is the real reason why the Fed is indicating another change in monetary policy. Back to rate cuts. Back to cheap money. Eventually, this leads to inflation. Bottom line: If you want to be able to afford to go to the movies to see this horror film, get some gold.
Wednesday, July 17, 2019
Debt + $ = $Crisis
The one big problem with democracy is when people with money and influence cause a change in our society. There are many examples, but there are two that I feel is the dry rot that is a danger to the American way of life and the global community.
The Fed
When the bankers found their footing with lobbyists and campaign donations, they were rewarded with the founding of the Federal Reserve. The reserve means the banking industry has protection. The taxpayers become their back-up. This violated the constitution because the endgame was fiat money over the gold standard. This is where the wealth gap begins. This is the beginning in the decline of our standard of living. The value of our dollar declines which is inflation that you do not see, but it is very real. They even changed economic thinking to say that credit was an asset. Credit is debt. Debt is a liability. Bottom line of the Federal Reserve: the US has the greatest liabilities in the world. Now, think about this: the global economy is slowing and the blame is on tariffs. Not all true. Every nation has tariffs. The only change was the US adding to the equation. The real culprit is credit. World credit has retracted by 40%. This is what has effected the Chinese economy the most. The US use to be the engine for the world. China has been playing that role for over a decade until the dangers of credit and debt began to surface. During this period credit has grown fourfold to $41 trillion from $9 trillion back in 2009. No one knows what real assets are in the world's banks. They all lie just like President Johnson who had the Vietnam war costs off the books. Who can say for sure what are the real debt figures. The derivative market is where I see the real danger of a panic in currencies and to the global community. Just look at Deutsche Bank. In the EU, Germany has the biggest and strongest economy and yet, their biggest bank is technically bankrupt. It is around only because of the ego of the German government. We are no better. I read somewhere that some analysts says the total US debt is $72 trillion which is 350% of our GDP. Those numbers are scary, but deceiving. Most of the debt ($52T) is social security. It is misleading because the costs are spread out over time and it is funded. What is really scary are things that are legislated, but overlooked like insurance for tall buildings since 9/11? How about the government sponsored flood program that covers both coasts? How about all those secret military programs? The list goes on-and-on and all based on worthless, fiat Fed money. The US citizen will suffer in the end due to fiat policies, the Fed and our corrupt, so-called leaders who allowed this to happen. The signs are not just written on the subway walls. Read on!
Military
The pentagon got to close to the government during WWII. With too much money and influence, the seeds for continual power developed. The military used any and every opportunity to gain the public's attention as well as Congress. By spreading military contracts to all states, the military had influence to all politicians. This is why the US budget allows 50% or more to the military. It is another violation of the thinking of the founding fathers, "Do not get involved with foreign affairs." The military has troops in over 100 countries. This is wrong!
Fed + Miltary
This is an alliance of mutual interest over the interest of the citizen. The Fed creates wealth for the elite and provides money for the military. The military looks the other way on the debt issue because they believe that the money lenders will solve the problem one way or another. They are both guilty of greed, ego and beliefs. Together, the two evils are spending what the nation cannot afford. It leads too...
More debt does not solve old debt...
it just pushes back to a later date with even more debt until it collapses. This is what happens to all fiat based economies. It is why the USSR failed. They put all their wealth into the military until they no longer could finance the debt. This would have happened to the US years ago if we were not the world's reserve currency. We are not alone. Every nation in the world prints paper. The citizen just hopes that the people in power know what they are doing. They don't!
Debt Ceiling...
is in the news again. Dear Reader, if you look closely at the last time this occurred and even prior to that, our national debt has exploded past $20 trillion. Sebastian predicted this would happen when it was at $13 trillion. Anyway, each time a consensus is reached, the debt allocated to finance the government is always more than enough to cover one full year. In reality, the new debt level is spent long before the fiscal year ends. This is the sad direction of our so-called leaders, both democrats and republicans. This is what is happening now. They need more money, again!
Some politicians are pushing for a two year plan. They say just add another $500 billion. This is money for the military (republicans) and social programs (democrats). People, $500 billion is more money than all of the US debt from our beginning until 1975 which includes WWII and Vietnam.
This is a failure to manage the government, the currency and our economy. By the way, Reagan who ran on cutting big government was the first to push the deficits over $1 trillion.
Want more proof? Here is a recap since the last crisis in 2008. Our central bank, the Fed has instituted three rounds of QE and they cut interest rates to zero. Why so much, you might ask? Because the US is the biggest debtor and if we maintained normal interest rates, the dollar would have collapsed along with our government and economy. Fortunately, we are not alone. Every nation reacted in the same manner (a fool and his money).
The world is floating on the sea of debt in a water logged, fiat papered boat. Banks needed a new plan. Central banks came up with this plan. They will buy government debt even if no one else would. They could drop rates below zero or negative. This means a bond is worth less in the end than the purchase price. This is failure! Then, some central banks supported their stock exchanges (read wealthy) by buying shares of stocks. They control the media and the dialogue as if there really was a dialogue. Things have gotten so bad that US companies are buying into the game. Ford purchased a negative bond which guarantees that they will lose money over the long haul for cash today. Remember when all those shills use to say, "Don't buy gold, it doesn't pay interest?" Gold was legislated out of paying interest, but the idiots can't stop gold from maintaining value to which it has always done. This is the same argument for Bitcoins. People, a digital notation is no comparison to the metal that does not tarnish.
Anyway, my point is this: fiat money is losing value every minute while gold does not and it could increase in value to any and all currencies. Gold does not look for cash today, but it takes the long view. At one time it was used to back the pound. Then, it was used to back the dollar. One cannot know what lies beyong the next mountain, but gold will hold its own no matter the outcome. Gold is an asset and assets trump liabilities. This aspect is reflected by our founding fathers who put the precious metal in our constitution. Enough said.
The Fed
When the bankers found their footing with lobbyists and campaign donations, they were rewarded with the founding of the Federal Reserve. The reserve means the banking industry has protection. The taxpayers become their back-up. This violated the constitution because the endgame was fiat money over the gold standard. This is where the wealth gap begins. This is the beginning in the decline of our standard of living. The value of our dollar declines which is inflation that you do not see, but it is very real. They even changed economic thinking to say that credit was an asset. Credit is debt. Debt is a liability. Bottom line of the Federal Reserve: the US has the greatest liabilities in the world. Now, think about this: the global economy is slowing and the blame is on tariffs. Not all true. Every nation has tariffs. The only change was the US adding to the equation. The real culprit is credit. World credit has retracted by 40%. This is what has effected the Chinese economy the most. The US use to be the engine for the world. China has been playing that role for over a decade until the dangers of credit and debt began to surface. During this period credit has grown fourfold to $41 trillion from $9 trillion back in 2009. No one knows what real assets are in the world's banks. They all lie just like President Johnson who had the Vietnam war costs off the books. Who can say for sure what are the real debt figures. The derivative market is where I see the real danger of a panic in currencies and to the global community. Just look at Deutsche Bank. In the EU, Germany has the biggest and strongest economy and yet, their biggest bank is technically bankrupt. It is around only because of the ego of the German government. We are no better. I read somewhere that some analysts says the total US debt is $72 trillion which is 350% of our GDP. Those numbers are scary, but deceiving. Most of the debt ($52T) is social security. It is misleading because the costs are spread out over time and it is funded. What is really scary are things that are legislated, but overlooked like insurance for tall buildings since 9/11? How about the government sponsored flood program that covers both coasts? How about all those secret military programs? The list goes on-and-on and all based on worthless, fiat Fed money. The US citizen will suffer in the end due to fiat policies, the Fed and our corrupt, so-called leaders who allowed this to happen. The signs are not just written on the subway walls. Read on!
Military
The pentagon got to close to the government during WWII. With too much money and influence, the seeds for continual power developed. The military used any and every opportunity to gain the public's attention as well as Congress. By spreading military contracts to all states, the military had influence to all politicians. This is why the US budget allows 50% or more to the military. It is another violation of the thinking of the founding fathers, "Do not get involved with foreign affairs." The military has troops in over 100 countries. This is wrong!
Fed + Miltary
This is an alliance of mutual interest over the interest of the citizen. The Fed creates wealth for the elite and provides money for the military. The military looks the other way on the debt issue because they believe that the money lenders will solve the problem one way or another. They are both guilty of greed, ego and beliefs. Together, the two evils are spending what the nation cannot afford. It leads too...
More debt does not solve old debt...
it just pushes back to a later date with even more debt until it collapses. This is what happens to all fiat based economies. It is why the USSR failed. They put all their wealth into the military until they no longer could finance the debt. This would have happened to the US years ago if we were not the world's reserve currency. We are not alone. Every nation in the world prints paper. The citizen just hopes that the people in power know what they are doing. They don't!
Debt Ceiling...
is in the news again. Dear Reader, if you look closely at the last time this occurred and even prior to that, our national debt has exploded past $20 trillion. Sebastian predicted this would happen when it was at $13 trillion. Anyway, each time a consensus is reached, the debt allocated to finance the government is always more than enough to cover one full year. In reality, the new debt level is spent long before the fiscal year ends. This is the sad direction of our so-called leaders, both democrats and republicans. This is what is happening now. They need more money, again!
Some politicians are pushing for a two year plan. They say just add another $500 billion. This is money for the military (republicans) and social programs (democrats). People, $500 billion is more money than all of the US debt from our beginning until 1975 which includes WWII and Vietnam.
This is a failure to manage the government, the currency and our economy. By the way, Reagan who ran on cutting big government was the first to push the deficits over $1 trillion.
Want more proof? Here is a recap since the last crisis in 2008. Our central bank, the Fed has instituted three rounds of QE and they cut interest rates to zero. Why so much, you might ask? Because the US is the biggest debtor and if we maintained normal interest rates, the dollar would have collapsed along with our government and economy. Fortunately, we are not alone. Every nation reacted in the same manner (a fool and his money).
The world is floating on the sea of debt in a water logged, fiat papered boat. Banks needed a new plan. Central banks came up with this plan. They will buy government debt even if no one else would. They could drop rates below zero or negative. This means a bond is worth less in the end than the purchase price. This is failure! Then, some central banks supported their stock exchanges (read wealthy) by buying shares of stocks. They control the media and the dialogue as if there really was a dialogue. Things have gotten so bad that US companies are buying into the game. Ford purchased a negative bond which guarantees that they will lose money over the long haul for cash today. Remember when all those shills use to say, "Don't buy gold, it doesn't pay interest?" Gold was legislated out of paying interest, but the idiots can't stop gold from maintaining value to which it has always done. This is the same argument for Bitcoins. People, a digital notation is no comparison to the metal that does not tarnish.
Anyway, my point is this: fiat money is losing value every minute while gold does not and it could increase in value to any and all currencies. Gold does not look for cash today, but it takes the long view. At one time it was used to back the pound. Then, it was used to back the dollar. One cannot know what lies beyong the next mountain, but gold will hold its own no matter the outcome. Gold is an asset and assets trump liabilities. This aspect is reflected by our founding fathers who put the precious metal in our constitution. Enough said.
Wednesday, July 10, 2019
First Retail, Now Restaurants
The sad state of US retail cannot be blamed on trade tensions, outsourcing or imports. It dates back to overexpansion in the 1980s. It seemed like any and every vacate intersection was game for development. Thus, we grew malls, regional shopping centers, basic shopping centers, strip-store shopping and factory outlets all over the nation.
The timing was perfect in the aspect that factory jobs were being outsourced and these opportunities offered employment, especially for people who were being displaced by the lost of their previous employer. A few years later, those same workers became disillusioned with their new employment. Wages were stagnant. There were no benefits, no pensions and little opportunity for advancement. The main reason nothing was done politically, was because the individual was disenfranchised. Even with the advent of the internet, we are still just one voice crying aloud, and in this case, crying in digital.
History Repeats
Although this multi-generation of workers got the short end of the stick by the wealthy producers in America who outsourced our labor, they had one thing in common that gave them hope - their homes. Home values would provide a nest egg in lieu of a pension and or, higher wages saved in bank accounts. There were also some token measures by some good Congress members with IRAs and 401s. Together, all these factors kept workers working in low paying jobs because they could see a decent retirement.
A New Crisis
The plan hit not just a pot-hole, but a road cave-in. Somewhere along the journey of life, the housing phenomena grew beyond belief. You know the old expression, "If it's too good to be true, it is!" Well, people began speculating with their homes. They saw and read where their neighbors sold and made overnight all that they could have saved over the years, if they had a better paying job. They heard tales of unemployed who took a beat-up, fixer-upper and now, they are on easy street. People took the plunge. They did not think that by selling their $50,000 home for $200,000, the ramifications of their choice. They purchased a $300,000 McMansion. Then, they flipped this showplace for a $400,000 no money down and no verification required speculation home. They did not stop to think about real financing. Everybody was doing it and banking was going along, so what's to worry?
Financing 101
Let's do a quick math application. To make a deeper impression, I am going to use the present, lower interest rates to calculation the basic financing requirement for a $400,000 super-home back in 2006.
You would need to make at minimum $1600 plus per week. Dear Reader, there is no need to tell you that retail in any form or level does not pay those type of numbers. By the way, that possible buyer had better have no car payments, credit card debt or other financial obligations like student debt. No one had those middle-class income numbers. Slowly, but surely, the flippers got flipped. The parade ended in the show rooms of new subdivisions. The party was over. Now, those speculators must come up with $2,000 plus every month to pay the mortgage. We all know what happened.
Enter Today
The Obama stimulus along with the Fed cutting interest rates to zero, spurred the business cycle to begin anew. The problem was to find a quality job that paid a living wage. This is still the problem. It is why the middle-class is shrinking. The tragedy of outsourcing is that America was hope for the world. We had the provided the highest opportunity for advancement - social mobility. Today, we are number 40 and SINKING! This is the wealth gap. It will be a sad day in America when we have only two classes: affluent and poor. This is the curse of European aristocratic thinking. It is killing the American dream.
Anyway, people are not dump. They could see where retail was going, especially with the advent of the internet and Amazon. Restaurants on the other hand, were thriving. There were opportunities for advancement and tips along the way. People eat out as much as they love to shop. It became a job magnate.
Problem?
Most restaurants went where the shoppers went: malls, shopping centers, etc. As those locations suffered due to loss of anchors like Sears, J. C. Penny, et al. those shopping districts became less desirable. Restaurants became collateral damage. This is part two to the growing Armageddon in retail. Part three would be the individual shops like a tailor, shoemaker, repairman, etc. Stats on those failures or successes are difficult to assemble, but they too are going by way of the Dodo Bird. I like the idea of small business Saturday. This concept is to support small business on the day after Black Friday. However, once a year is to little and probably too late.
Anyway, I see two other problems in what is taking place in the market. The first and foremost is the advantage of the internet over foot traffic. No sales tax. Congress better make up and give brick and mortar a equal playing field. The second is more subtle. The growing use of the I-phone to pay a purchase. Money is financial independence. We have been led by convenience of checking, credit and now, digital over a cash transaction. People, this is setting you up for a serious crisis. If the banks shut off your credit line, you are broke. Repeat that! You will have no financial freedom. You will be subject to state control. This is evil beyond comprehension.
Enough said. The collateral damage to restaurants is alarming. Here is a list that are on the same road as Radio Shack. There are other reasons for failure among the primary is overexpansion, menu change and changing demographic core customers. Some are not going out of business, but are declining in nature as competition is fierce.
*Fuddruckers - not closing, but severe sales decline.
*HomeTown Buffet - loss of customers by demographics.
*Ruby Tuesday - collateral damage in shopping area.
*Friendly's - changing demographics and competition.
*Tim Horton's - overexpansion from Canada.
*Papa John's - descension.
*Eat 'n Park - declining sales, competition.
*Quiznos - declining sales, demographics and competition.
*Carl's Jr. - declining sales, demographics and competition.
*Steak 'n Shake - demographics and competition.
*O' Charley's - declining sales, competition.
*Starbucks - Yes, the coffee chain is safe, but sales are falling rapidly and competition is growing.
*Polo Tropical - overexpansion.
*Pizza Rev - Kramer's idea - make your own. Sorry, Cosmo. This is a no go.
*IHOP - declining sales, demographics and menu change.
*Johnny Carino's - location.
*PDQ (People Dedicated to Quality) - overexpansion.
*Subway - menu and corporate pricing with franchises, declining sales, demographics.
*Papa Murphy's - variation of Kramer's idea with the same results - no go.
*Village Inn - demographics.
*Pie Five - overexpansion.
*Potbelly - same problem as Subway and declining sales.
*Luby's - location and declining sales.
*Applebee's - in transition, sales falling.
*Chipotle - health scare, repeatedly. Management, expansion and competition.
The list is long and keep in mind that these are chains which means you have to multiply the number of locations with the number of workers. Not Good!
The timing was perfect in the aspect that factory jobs were being outsourced and these opportunities offered employment, especially for people who were being displaced by the lost of their previous employer. A few years later, those same workers became disillusioned with their new employment. Wages were stagnant. There were no benefits, no pensions and little opportunity for advancement. The main reason nothing was done politically, was because the individual was disenfranchised. Even with the advent of the internet, we are still just one voice crying aloud, and in this case, crying in digital.
History Repeats
Although this multi-generation of workers got the short end of the stick by the wealthy producers in America who outsourced our labor, they had one thing in common that gave them hope - their homes. Home values would provide a nest egg in lieu of a pension and or, higher wages saved in bank accounts. There were also some token measures by some good Congress members with IRAs and 401s. Together, all these factors kept workers working in low paying jobs because they could see a decent retirement.
A New Crisis
The plan hit not just a pot-hole, but a road cave-in. Somewhere along the journey of life, the housing phenomena grew beyond belief. You know the old expression, "If it's too good to be true, it is!" Well, people began speculating with their homes. They saw and read where their neighbors sold and made overnight all that they could have saved over the years, if they had a better paying job. They heard tales of unemployed who took a beat-up, fixer-upper and now, they are on easy street. People took the plunge. They did not think that by selling their $50,000 home for $200,000, the ramifications of their choice. They purchased a $300,000 McMansion. Then, they flipped this showplace for a $400,000 no money down and no verification required speculation home. They did not stop to think about real financing. Everybody was doing it and banking was going along, so what's to worry?
Financing 101
Let's do a quick math application. To make a deeper impression, I am going to use the present, lower interest rates to calculation the basic financing requirement for a $400,000 super-home back in 2006.
You would need to make at minimum $1600 plus per week. Dear Reader, there is no need to tell you that retail in any form or level does not pay those type of numbers. By the way, that possible buyer had better have no car payments, credit card debt or other financial obligations like student debt. No one had those middle-class income numbers. Slowly, but surely, the flippers got flipped. The parade ended in the show rooms of new subdivisions. The party was over. Now, those speculators must come up with $2,000 plus every month to pay the mortgage. We all know what happened.
Enter Today
The Obama stimulus along with the Fed cutting interest rates to zero, spurred the business cycle to begin anew. The problem was to find a quality job that paid a living wage. This is still the problem. It is why the middle-class is shrinking. The tragedy of outsourcing is that America was hope for the world. We had the provided the highest opportunity for advancement - social mobility. Today, we are number 40 and SINKING! This is the wealth gap. It will be a sad day in America when we have only two classes: affluent and poor. This is the curse of European aristocratic thinking. It is killing the American dream.
Anyway, people are not dump. They could see where retail was going, especially with the advent of the internet and Amazon. Restaurants on the other hand, were thriving. There were opportunities for advancement and tips along the way. People eat out as much as they love to shop. It became a job magnate.
Problem?
Most restaurants went where the shoppers went: malls, shopping centers, etc. As those locations suffered due to loss of anchors like Sears, J. C. Penny, et al. those shopping districts became less desirable. Restaurants became collateral damage. This is part two to the growing Armageddon in retail. Part three would be the individual shops like a tailor, shoemaker, repairman, etc. Stats on those failures or successes are difficult to assemble, but they too are going by way of the Dodo Bird. I like the idea of small business Saturday. This concept is to support small business on the day after Black Friday. However, once a year is to little and probably too late.
Anyway, I see two other problems in what is taking place in the market. The first and foremost is the advantage of the internet over foot traffic. No sales tax. Congress better make up and give brick and mortar a equal playing field. The second is more subtle. The growing use of the I-phone to pay a purchase. Money is financial independence. We have been led by convenience of checking, credit and now, digital over a cash transaction. People, this is setting you up for a serious crisis. If the banks shut off your credit line, you are broke. Repeat that! You will have no financial freedom. You will be subject to state control. This is evil beyond comprehension.
Enough said. The collateral damage to restaurants is alarming. Here is a list that are on the same road as Radio Shack. There are other reasons for failure among the primary is overexpansion, menu change and changing demographic core customers. Some are not going out of business, but are declining in nature as competition is fierce.
*Fuddruckers - not closing, but severe sales decline.
*HomeTown Buffet - loss of customers by demographics.
*Ruby Tuesday - collateral damage in shopping area.
*Friendly's - changing demographics and competition.
*Tim Horton's - overexpansion from Canada.
*Papa John's - descension.
*Eat 'n Park - declining sales, competition.
*Quiznos - declining sales, demographics and competition.
*Carl's Jr. - declining sales, demographics and competition.
*Steak 'n Shake - demographics and competition.
*O' Charley's - declining sales, competition.
*Starbucks - Yes, the coffee chain is safe, but sales are falling rapidly and competition is growing.
*Polo Tropical - overexpansion.
*Pizza Rev - Kramer's idea - make your own. Sorry, Cosmo. This is a no go.
*IHOP - declining sales, demographics and menu change.
*Johnny Carino's - location.
*PDQ (People Dedicated to Quality) - overexpansion.
*Subway - menu and corporate pricing with franchises, declining sales, demographics.
*Papa Murphy's - variation of Kramer's idea with the same results - no go.
*Village Inn - demographics.
*Pie Five - overexpansion.
*Potbelly - same problem as Subway and declining sales.
*Luby's - location and declining sales.
*Applebee's - in transition, sales falling.
*Chipotle - health scare, repeatedly. Management, expansion and competition.
The list is long and keep in mind that these are chains which means you have to multiply the number of locations with the number of workers. Not Good!
Wednesday, July 3, 2019
Hypocrites and Phonies
The big G-20 Summit in Japan has come and gone. The politicians returned to their respective nations and all declared that things are getting better: if you only do as I say, excuse me, suggest. President Trump made a gambit to use for his re-election in 2020. He was very close to North Korea. Why not try and get some future relations with that nation after the two non-fruitful meetings? He succeeded in one aspect, now he can say during his re-election campaign that he is the only sitting president to step foot in North Korea. However, did he get any results in the nuclear arms agenda? No! This is BS! Dear Reader, this is baseball season. In baseball if you whiff after three swings, you're out. Trump struck out!
North Korea has played this nuclear card threat game for 50 years. They know that they have their big Communist brother, China backing them up. This takes me back to the political games just prior to the summit.
Bullying!
The Chinese premier, XI stated that China would not be bullied into any trade deals. Without naming names, we all know that he was referring to President Trump and his use of tariffs. This guy has gall beyond gall! He is the poster child for Hypocrites!
China demands that any company wishing to enter the Chinese market, agree to become a Chinese company. This means that Apple in China is a Chinese company as well as Mercedes and every other entity that does business in China.
The demands get worse! Every company must transfer its technology or blueprint of their
product to which they may manufacture to sell there or export. This is how the Chinese steal product knowledge and by-pass patents. Our government was corrupt in allowing our companies to do business with China with those demands. The guilt is in both the Republicans and Democrats to which is why we say here at Evolution of Democracy that we need a third political party in the US. That party should begin with two basic ideas: Protect US workers and end our military use at our border.
By the way, China has some of the highest tariffs in the world along with Japan and the EU. They are all BS artists! If you are keeping score, this is the third time tariffs swing for a hit in the trade talks. The negotiations struck out. That's two down or two outs, whatever you prefer.
The bond market has been screaming inversion! Alan Greenspan just said, "The bond market is in a bubble. This will be the crisis." Folks, the inning is over because this is the third out. Recession is coming! If you doubt that prediction, here is a recap of the democratic debate.
Democratic Debate
Did you watch any of this? I tuned it in. To be honest, there is only so much crap that I can bear to hear. With that said, I found these two points that I want to rant upon.
1) The moderators are programmed idiots! You can see that after you realize the questions that they ask and how the many issues inter-relate.
2) There was no one there that should be our president. The only member of the ten among the Democrats that showed any truthful and thoughtfulness behind her answers was Maryanne Williamson.
Where to begin?
Healthcare...
was a topic for both nights. My rants is addressed to the second night. Every candidate had a motion about healthcare. Biden still backs the Obama, ACA. The rest pushed a variation of Medicare for all. This is where I enter. Neither the moderator nor any candidate explained the facts about Medicare.
First of all, Medicare is a paid plan. When you reach the age of 65, you must pay into the plan whether you use it or not. If you delay collecting Social Security, this expense is costly. Bernie says his plan is like the First Payer Plan. My understanding of that plan is that it is a free medical program that is paid by the government for everybody and it covers everything. Medicare only covers 80% and it does not cover everything. By the way, Bernie says that taxes will go up to pay for his version to which has not been revealed as of yet.
None of the candidates or the moderators ever mentioned the fact that Medicare is like medical insurance. You have to pay into it and it does not cover every medical need with a 20% gap that the individual must cover.
The next issue shows the complete phoniness of senator, Kamala Harris and congressman, Beto O'Rourke.
The moderator changed the topic to the illegals at the Southern Border. She asked, "Would you allow medical to illegals?" The question is not even a question. The moderator should know that any illegal who enters a US hospital will receive health care at the US taxpayer's expense. In addition, the two states that suffer the most expenses due to this medical aspect is, California and Texas. Neither candidate that I mentioned above answered this question truthfully. Why, you ask? Because they want the Hispanic vote. They should have stated the truth. Many illegals enter the US to receive free medical. They know this. They also know if a woman gets pregnant and she can slip across the border, the pluses multiply. She gets free medical. Her child automatically becomes a US citizen to which she can use to enter the US. You read it here, but you didn't hear it there. God help America because none of the Democrats will.
North Korea has played this nuclear card threat game for 50 years. They know that they have their big Communist brother, China backing them up. This takes me back to the political games just prior to the summit.
Bullying!
The Chinese premier, XI stated that China would not be bullied into any trade deals. Without naming names, we all know that he was referring to President Trump and his use of tariffs. This guy has gall beyond gall! He is the poster child for Hypocrites!
China demands that any company wishing to enter the Chinese market, agree to become a Chinese company. This means that Apple in China is a Chinese company as well as Mercedes and every other entity that does business in China.
The demands get worse! Every company must transfer its technology or blueprint of their
product to which they may manufacture to sell there or export. This is how the Chinese steal product knowledge and by-pass patents. Our government was corrupt in allowing our companies to do business with China with those demands. The guilt is in both the Republicans and Democrats to which is why we say here at Evolution of Democracy that we need a third political party in the US. That party should begin with two basic ideas: Protect US workers and end our military use at our border.
By the way, China has some of the highest tariffs in the world along with Japan and the EU. They are all BS artists! If you are keeping score, this is the third time tariffs swing for a hit in the trade talks. The negotiations struck out. That's two down or two outs, whatever you prefer.
The bond market has been screaming inversion! Alan Greenspan just said, "The bond market is in a bubble. This will be the crisis." Folks, the inning is over because this is the third out. Recession is coming! If you doubt that prediction, here is a recap of the democratic debate.
Democratic Debate
Did you watch any of this? I tuned it in. To be honest, there is only so much crap that I can bear to hear. With that said, I found these two points that I want to rant upon.
1) The moderators are programmed idiots! You can see that after you realize the questions that they ask and how the many issues inter-relate.
2) There was no one there that should be our president. The only member of the ten among the Democrats that showed any truthful and thoughtfulness behind her answers was Maryanne Williamson.
Where to begin?
Healthcare...
was a topic for both nights. My rants is addressed to the second night. Every candidate had a motion about healthcare. Biden still backs the Obama, ACA. The rest pushed a variation of Medicare for all. This is where I enter. Neither the moderator nor any candidate explained the facts about Medicare.
First of all, Medicare is a paid plan. When you reach the age of 65, you must pay into the plan whether you use it or not. If you delay collecting Social Security, this expense is costly. Bernie says his plan is like the First Payer Plan. My understanding of that plan is that it is a free medical program that is paid by the government for everybody and it covers everything. Medicare only covers 80% and it does not cover everything. By the way, Bernie says that taxes will go up to pay for his version to which has not been revealed as of yet.
None of the candidates or the moderators ever mentioned the fact that Medicare is like medical insurance. You have to pay into it and it does not cover every medical need with a 20% gap that the individual must cover.
The next issue shows the complete phoniness of senator, Kamala Harris and congressman, Beto O'Rourke.
The moderator changed the topic to the illegals at the Southern Border. She asked, "Would you allow medical to illegals?" The question is not even a question. The moderator should know that any illegal who enters a US hospital will receive health care at the US taxpayer's expense. In addition, the two states that suffer the most expenses due to this medical aspect is, California and Texas. Neither candidate that I mentioned above answered this question truthfully. Why, you ask? Because they want the Hispanic vote. They should have stated the truth. Many illegals enter the US to receive free medical. They know this. They also know if a woman gets pregnant and she can slip across the border, the pluses multiply. She gets free medical. Her child automatically becomes a US citizen to which she can use to enter the US. You read it here, but you didn't hear it there. God help America because none of the Democrats will.
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