Old Is New

- Keep your face always toward the sunshine - and shadows will fall behind you.

- Walt Whitman 

Buybacks

No! Not stocks. We are talking about "old" government bonds. The quiet news last Friday is typical of the government. A crisis is brewing, but the powers-to-be are seeking, as they always do, to keep it under wrap. The US Treasury Department stated that "Yellen" Yellen is considering buying back old government bonds.

Just recently, figuratively speaking, the Fed said that they will shrink their excessive balance sheet. They sold old government bonds in the marketplace. The problem is no one wants to buy them. Now, they say that they will repurchase them and hold to maturity. By the way, the US government bond market is the world's largest. It stands at $22.6 trillion. That is almost half the world's GDP. Danger on so many levels and all as a result of the Fed's polcies.

End the Fed!

You have read that meme many times in this blog. Here is another reason. You should be aware by now of the financial crisis occurring in the UK. They are having a liquidity crisis. Their central bank has been forced to intervene or England might have a "Lehman" moment? Well, the same type of problem is developing in the US. Let us step back (not a buyback) for a moment.

Europe Vacation?

If you traveled to the UK in June of this year, our dollar lost to the pound. The pound stood at 142. However, behind the scenes, with rising interest rates, the problem could have been seen. In fact, whenever rates change, this concept has to be considered. What is it? Why, you ask?

You can answer the question by understanding the present value of the pound. Last Friday, it closed at 111. It touched 102 in September. The English pay more for everything. Inflation, yes, but the root problem is the value of their currency. Having a choice, wouldn't you rather have your European vacation now? This is the present situation in the UK. It has not yet been resolved. It centers on our example. Would you want to purchase a government bond that pays 1.5% or 3% with the exact same time duration?

In the US, you can get buy a 30-year note that yields 3.99% or a 12-month note that yields 4.46%. Why would anyone buy the "old" 30-year note when the one year pays more? This is the brewing financial crisis in the US. This is the story behind Yellen's statement. 

Cause?

The Federal Reserve is to blame. By keeping interest rates artifically low, (1st cause) and our nation importing everything, (2cd cause) the currency differential kept inflation in check. However, humans being human, want and need a little more for their work. When they receive better eages, their producers pass along the price increase. This is what is happening now. Foreign imports cost more. Our higher interest rates have held these costs increases in check (which is really scary), but at the same time, this Fed manuver is causing havoc in the global community. Every nation is suffering from currency differential. Inflation is a worldwide problem. We are not making friends and the Chinese see that. They are seeking to gain from the Fed's mistakes. Can you say...

Asian Yuan?

The Chinese are copying everything. Their latest is to clone the euro by offering the yuan to all Asia. This danger is still yet, another reason to End the Fed!             Peace. 

Markets and Oil

Outlook 

The market could barely muster a bounce to which we called with the disclaimer that the trend is down. We further stated that we are already in a stealth recession. By that we mean that like inflation the signs appear at different sectors at different times. 

You can best see that with oil. It was one of the first places inflation showed itself. Then, the president opened the nation's oil reserve and stated that the Arabs would produce more oil. The price slowly declined. The pulpit is a strong influence, but time reveals the truth. OPEC publically stated that they will reduce production by two million barrels a day. Demand has been leveled by higher prices. By that we mean even though oil usage has fallen, the higher price maintains the margins. The price of oil shares has risen.

Elsewhere...

Tuesday's price action fell below Monday's low and then, finished higher. This is an indicator of a bounce. However, on the flipside, the VIX is breaking to the upside and it also breached its channel, upward. It shows this on both a weekly and monthly chart. This is bearish. Market might be saying that we will be range bound until the next Fed meeting? However, globally the UK is a mess.

It has the on-going instability in the English marketplace. Their central bank had to intervene again and left the door open for more stimulus. The pound will continue to decline. The IMF said the UK will be hurt the most by inflation. Speaking of the devil, the US showed another inverted yield. You can buy a 10-Year note and barely receive 4% or you can purchase a 2-Year bill and get 4.3%. Some nation is sinking a lot of money to move rates and for what purpose? However, we are talking about the market in general. In that aspect...

Chips...

led the market up and they are leading it down. The SMH index fell to 188 last Friday. It was 245 in August. It looks like 160 is the target and resistance.

Gaps...

are important. The window may eventually close, but the key word means time. The present state of the market is revealing many gaps in price. There are gaps in the continuous contract in oil. We, at Evolution always use oil because it is the most important commodity after food and water. Unlike the Federal Reserve, we need it everyday. $Brent closed Friday at $98.45. It looks to retest resistance at $102. This will raise the price of US crude. It looks to retest resistance at $96. Keep in mind that the US oil price burst through its 50-day moving average of $87 and $96 is also the 200-day average. Of course, oil is only one segment of the market. The rest is being thrown out as buyers will only venture upto a certain price. At the moment, sellers close positions at a certain level. This will change.

Last Friday, the Dow had a huge gap down. The market already broke the June lows in a big way. We repeat what we already stated. The Dow looks to test resistance at 26,000. The transports are driving to the roadblock at 11,000. The S&P is gaining strength to test resistance at 32,000.

Other aspects

Oil received a blow last week. The world's largest reinsurance firm, Munich Re declared that after the end of the year, it will no longer insure new projects. If an oil firm cannot get insurance, it cannot get financing. This is even a bigger blow to consumers. It adds inflation to the cost of oil. The latest an oil firm can get insurance from Munich is next April. There are 30 firms that offer this service and now, 13 are cancelling applications and opting out of this business. 

An analyst, Mish Schneider who specializes in commodities says from her research that when gold out performs the S&P, commodities begin to rise. Something to watch?

Putting these aspects together and with what we have already compiled, we believe stagflation is our biggest and most dangerous danger other than the escalation of the Ukraine war. Try to live your life as best as you can and add love as best as you can.    Peace.

FED: UK Style

Market Outlook

What we here at Evolution called our present economy, "Stealth Recession." It is slowly filtering into bigger investors mindset. This recession style is similar to inflation. It pops up in different sectors at different times. Speaking of the devil, inflation, the cousin of debt, is hitting Europe and last week, made a serious threat in the UK. Their central bank like all their sibblings acted for the elite. It is their true purpose. Before we get into that, we review the US market and our outlook.

New Lows

We stated that we felt that the market bulls would seek to rally or at least get a bounce? That call was late in developing, but it turns out correct. Keep in mind that we declared to participate in this market environment is dangerous. We refer to our original call over a month ago. We stated that we feel our economy is in a stealth recession. This fear gage is slowly taking hold as the market could only generate a poor bounce and then, fell to new lows. All 30 of the Dow stocks were red last Friday. Keep in mind this is twice as powerful because the date coincided with option expiration. The market showed strength in the decline as the price pierced the March 2020 low. The price is now in the high of the low which is a whole new range level. 

Crucial Level

We love Fibonacci math. In retracement moves, we look for two price levels. A fifty percent decline is normal in Bull markets. A .618 says further declines could come. At present, the market says it could fall to the 26,000 level. The S&P could hit 3136 and the transports touch 10,000. The fear level is rising and we are in October. Buyer beware! 

UK

The central bank over in England acted just like our Federal Reserve. It should. It was the blueprint for ours even though ours is more important. Anyway, their banks made the wrong calls in trades. Their pension funds were about to collapse. They intervened. They purchased bonds which we call QT stimulus. The good news is it saved the day. The bad news is the pound will continue to decline. Debt, the cousin of inflation will rise along with inflation. Pick your poison.

PS: Putin annexed land in Ukraine. What he is doing is escalating war. If the Ukraine troops enter their home-land to retake it, they are technically invaking Russia. If NATO accepts Ukraine into membership and comes to their aid, war could be enacted in all Europe. Then, to add fear, Putin reminded the world that the US is the only nation to use the atomic bomb, but laid the presicent. He didn't mention that Russia was not smart enough to develop their own. They stole it from us. He better heed that insight. The US is capable of inventing and sadly, this includes warfare.

Famous Last Words

Hitler declared the Reich would last 1,000 years. Putin said the Ukraine land is Russia's forever.              You reap what you sow.   Peace.

Odds and Ends: September 2022

Market Outlook

The market displayed real fear for the first time since the depths of the pandemic. The VIX broke above 30 last Friday.  This is what we, at Evolution call the crucial point in the fear index. The price did not hold. We stated in our last piece that the Bulls will seek to bounce the market. There was the expected pause as the Fed had its meeting and results. We predict that the three-quarter hike will be the last three-quarter hike. The next meeting the Federal Reserve will lay the groundwork for smaller hikes and then, pause with no hike. This will be their blink. However, we are getting a head of ourselves. 

Near-term

The shills will remind you that the market has some of its biggest rallies in November. They will "sell" their new favorite, MATANA (Microsoft, Apple, Tesla, Alphabet, Nvidia and Amazon). We feel that there will be a bounce just like the one in the first week of September. We called that one. In fact, we gave you the target at Dow, 32,500. Since the Dow fell below the June low, we feel that the bulls will only be able to reach 31,000. Then, a more likely consolidation period before forming a new low at 27,000. We see the transports break 10,000 and the S&P reach 3,300. Volume will determine a new target at that time. We say this because the bulls do not want to surrender their control of the market. They have the deeper pockets to cannibalize retail. If you look at last Friday's price action, the bulls rallied the market 30 S&P points or 300 in the Dow before the close. This aspect in price correction showed itself on Monday. The bears could not get enough sellers to breach Friday's low. If the bears manage to sell lower than Friday's low, this changes everything. Whatever the way the price action moves, volume will be the convincing tone. Whether I'm right or wrong, remember: the market is not rational.

Inflation

It is not going away any time soon. It rose 8.3% yoy in August. At the moment, the strong dollar, which touched a new high at 113, is causing havoc to the rest of the world. We may have seen low gas prices, but do not expect that to last for long. The way the dollar is trending, it appears that it will attack its all-time high at 120. This may give US consumers some inflation relief, but we still import everything. Inflation moves around. You will see it appear in your utility bill and banks will seek more fees. Speaking of the shills selling the November rally, turkey will be the most expensive ever. We mentioned global inflation due to the strength of the dollar, consider Argentina? Their interest rate spiked to 75% with inflation running at 100%. That, Dear Reader is hardship. 

Danger Zones

The SPACs will be one cause for the market to form new lows. These special purchase acquisition companies are buying firms with no revenue and they are losing money. Don't fall for the meme.

Gold is also in the danger zone as long as it remains near its lows. Remember the market is not rational and the fiat people hate the precious metals. 

Don't forgt China and Asian nations. Their housing problems needed government intervention to avoid a collapse. 

Food insecurity is rising as more and more nations restrict food exports. Again, US consumers may not feel the pain, but the global community does.

The next item is the saddest of all. A report reveals that US retirement living standards continues to fall. It is sad enough that basic US standard of living keeps falling, but now, the elderly will suffer. According to the report, the US living standard for retirement had dropped to 18th on the world level. We see trouble everywhere. The scientists who gave us the "Doomsday Clock" also have a new report. It spells trouble with a capital "T" for Europe. When you look at the decline in the euro, you realize things are not good.

How about a leak in the underwater Nord Stream pipeline? Water geyers are happening and we already know water burns from the Cayuga River. It seems like more and more idiots are making decisions that hurt the world and pushing warlike actions.

Then, this from NASA. Shoot a rocket at a meteor to see if we can move its rotation path. At least someone was thinking if we destroy it, we get raining meteors like a buckshot. But, we ask, If moving the rotation path, are you not making it possible to collide it with another meteor? Of course, we are not scientists.

It is hard to write such scary stuff, but live in peace and love. This will make Him happy.  Peace.

  

Idiocy of Globalization

First off, let me say that I am not against global trading. However, the US, my country is the worst international trader in the world. One should always strive to be self-efficient. However, that is not always possible. Then, you trade. They might need what you got? Let's begin with the main benefactors of our outsourcing to which has destroyed our middle-class and standard of living.

South Korea

Our politicians were duped by the military into using our nation as a dumping ground for S. Korean exports. Many of their larger firms are really government subsideized enterprises. A basic American stand alone firm cannot compete fairly against a government corporation. We should never allow any government subsidized firm do business in America. This is socialism. It allows that form of economy to have the upper hand versus capitalism. Truth be told, we let South Korea send junk into our nation to keep them strong versus the Communists. Now, they have a powerful economy and the irony is unions are centerfold to their prosperity. Question? Do you think that they will fight the North Koreans if they had too? Do you think that they appreciate the suffering workers in our nation that allows them to live a better standard of living than we do? We do not need their cars, phones, TVs. Life will be Good when all our appliances are made in America. We need to return to protecting our economy and workers. This story can be repeated by almost every nation in the world.

Japan

They complain about quotas to their exports. In reality, their government does anything and everything to help their corporations and economy. The only positive with trading with Japan is their committment to excellence. They build to last. Our corporations came up with the concept of planned obsolesence. It is sad that they allowed idiots to control their government that led to war. Now, the sad reality is those same type of idiots have too much influence in our government. With that said, you should only trade for what you need or realize the trading entity has something to offer. Japan has something to offer, but we still need quotas. Again, government sponsored enterprises have a built-in advantage. 

China

They are ungrateful, egotistical, greedy and they are run with a philosophy that is anti-capitalist and anti-American. How can you trade with someone who demands that you reveal everything about your company? They want your blueprints and they offer no protection. How can you listen to their BS about protectionism when everything in their nation is controlled in one way or another by the government? The stupid elites think that by bringing this peasant nation into the 21st. Century that they would change their opinion of the West? Not happening. Now, if we put barriers to their economy, we will worry about war. This is the height of idiocy with globalization.

I could go on and on. The only positives that have come from globalization in recent years is foreign firms are building their factories in the US. Truth be told. They only do this because they realize the backlash will come to them because they use our nation as a dumping ground to help their own economies. We, at Evolution are always for American workers and against our military who have bankrupted our nation, allow hackers open entry and use our citizens as pawns in a global military police force. We are not the world's police force. All the pentagon has achieved is wasted money, resources and lives.

Proof?

It is all around us. We have jobs that cannot sustain a living. We see people everywhere sleeping on the street, in cars and RVs. We get reports all the time about foreign diseases and intrusions into our environment, into our agriculture and economy. We have snakes destroying the Everglades. We have useless fish that are killing our eatable fish in the Great Lakes, rivers and streams. Get this!

Florida Oranges

A freaking Asian disease is killing Florida oranges. In 2007, Florida produced 250 million boxes of oranges. Last year, it dropped to 40 million due to the global intrusion. For those of you who understand the old math, that is a 83% drop. We are losing an important industry. Farms are dying. In 2007, there were over 8,000 growers. Today, it is falling to 2,500. We can thank the BS artists who push globalizations and open borders with no protections! COVID-19 showed us that we don't manufacture anything. We couldn't find a mask anywhere. With the mid-terms approaching, ask hard questions. What are they going to do to stop outsourcing? How about tariffs to protect what is left and close the deficit? We don't want to hear that the candidate is for jobs. We need life sustaining work, not subsistance level.  

Market Outlook

The near-term looks like the Bulls will try to force the market up even after the Fed announcement. The media will BS all the crap like "Buy the dip!" They are controlled by the people who the shills work for. Don't be fooled! Inflation isn't going away. Keep in mind that already 20 million households are behind on their utility bill and a report says those same companies will seek a 7% increase next year.     Peace.

King $Dollar = Trouble

Market Outlook

Before we fill your head with another worry, we take a glance at the market. We told you repeatedly in our last few articles that the Dow appears to have a dual consolidation range within it. There are two ranges. A range within a range, if that is clearer. The rise in the market last week only made it reach to the top of the lower range. The market needs to breach 33,000 to be safely within the other or the top range. The volume suggests that the market will run out of gas in this (bounce) rally. The phonies and schills will seek to persuade you to buy. We recommend caution. We called this market is in a consolidation range over one month ago. We have been correct. 

Now, we have a new fear concerning the market action and price. Whenever the market forms a consolidation period, it is building cause for its next move. The longer the time period, the greater the move. The Fed's meeting is on 21st of September. Timing is crucial. At the moment, the market could rise up until that meeting. It will react to the interest rate hike. If this bounce does not clear 33,000 in the Dow, and it did not, so look out below!

King Dollar Worry

Last week, the dollar hit a new high at 110.79. It fell to 108, but that price level was rejected. It closed Friday at 109. The market does not like a strong dollar although it is good for US consumers. Our greedy, small minded producers have outsourced everything. So, they lose profits on foreign made products when they come back to sell in the US. While this may worry Wall Street, it is a killer for the global market. Keep in mind, the war in Europe is causing hardship with inflation pertaining to oil, gas and their factories and citizens in the EU. Their small minded, no vision leaders had years to prepare for the present situation. They should have begun LNG for energy. Granted, Germany has made some moves to alternative energy as well as Holland. France sticks with its dangerous nuclear and the rest, will feel a cold winter. Maybe, they should thin their forests to stop wild fires and give the wood to its citizens to keep their homes warm?

Anyway, the euro has fallen to par with the dollar and it actually fell lower. This is the trend. This translates to rising inflation in the EU. However, they are not alone. The Japanese yen is only worth .70 cents? I don't know about you, but I still see a lot of Japanese cars on US roads. How about made in China? Everywhere you look and on almost eberything that you buy, you see that label. If that is true, how can the Chinese yuan be only worth .14 cents to the US dollar?

Now, we realize that many commodities must be purchased in US dollars. This point is central to Putin's desire to have Russian oil sold in rubles as the Chinses want you to use the yuan. This is visual conflict.  There is also unseen conflict. There are derivatives on oil and gas. They are in a losing position due to the war and future outlook. This could cause financial contagion. My beloved country has leaders who have abused our reserve currency status. Our debt is becoming unpayable. This whole situation coud blow over or blow up? We feel that King Dollar is only worth .72 cents. Our forefathers had it right when they made gold our currency. After the Federal Reserve, the international exchange system is the second most corrupt aspect in the world. The unwarranted rise in the dollar spells rapid inflation to the global community. If the dollar is replaced, it spells possible civil unrest in the US. Let's pray that this will pass.     Peace.

Home on the Range

For all you cowboys out there, the title brings back memories, but I'm for the Forty-Niners!  The season starts tomorrow. Enjoy.

Anyway, I was referring to the stock market. A few weeks back, we, at Evolution mentioned that the market is showing a picture within a picture. By that, we mean that the charts on the Dow, Transports and S&P 500 are displaying two ranges within a large consolidation pattern. It continues.

If you are a Bull, you might worry, but I woud not, at least in the short-term. The market has declined to a point where it will run out of gas or sellers for that matter. The Dow is at the bottom of its first range and in the middle of its lower range. The Transports are also at the bottom of its first range and the top of its second. However, it has a bearish engulfing at the end of last Friday. This indicates more downward pressure. The S&P is 300 points away from its bottom. We feel the Bears will get tired. There will not be anymore sellers. The market should bounce. We need to see if this bounce is a lower bounce than the last confluential point. 

With that said, we also must look at the calendar. The Fed's meeting is coming up and September is generally a down month for the market. If I was a Bull, I would be very cautious. The signs of recession are not apparent as the market is not rational. How do you explain Micro Strategy (MSTR)? The market valued the firm at $525 a share in April and now, $218 and falling...hard. It is losing money like many other meme songs. Traditional things, things that you and I need every day, are in the dumps. We stated in last weeks piece, our continuing belief that we are already in a "stealth recession." We saw a suttle sign in the jobs report. How can you add 315,000 new jobs and then say, unemployment rose to 3.7%? We say because with higher interest rates, the zombie companies can no longer rollover their debt to keep being a going concern They are filing for bankruptcy. Here is our first short list. It shows what we see. The stealth recession is becoming more visual.

Revlon,    the space firm, Masten,   Endo Pharmaceutical,      Express Jet,   Bed, Bath and Beyond,

the imaging medical firm, Carestream Health,    Regal Cinema, part of Cineworld.

There are also sections of larger conglomerates like J&J, and 77 mortgage lending companies. So, it begins and soon, it will become apparent.         Peace.