Slight Concession

Back in January of 2022, our group stated that our economy is in a "stealth" recession. No one else agreed. Last week in the Fed's minutes, they said that they now see a recession within the economy. They did not date the occurrence. They did say that unemployment could reach 4.5%. If it takes 150,000 to move one tick, this translates to 1.5 million more unemployed.

We scanned the market. We found many reports indicating that a recession is knocking on the door. We stand by our call. One notable investor, Jeremy Grantham, sees what we see: Stagflation is slowly wrecking earnings and causing havoc to consumers. Then, we saw this...

Bank of America Report

The bank report lists factors that could direct the economy into a "full-blown" recession. They see the market believes that a rate cut is coming and a lack of fear by investors.                             

1) Manufacturing fell below the break-even point of 50. It resides at 46.3 with a poor outlook.                2) When you get lower manufacturing, lower earnings follow.                                                                    3) The yield curve is a very good indicator. It points to a recessionary outlook.                                          4) The oil price contract has a large gap that needs to be closed. Prices could fall to fill it.                        5) Job reports generally follow manufacturing and that outlook is poor. Layoffs will be coming.              6) There is a global reduction in home values as well as the US.                                                                  7) There are less dollars in circulation to which means less to lend = Credit crunch. Affects everything.  8) We see this in data from the US and Europe = less lending.                                                                    9) When you add just these aspects, it points to a stock market that will not blend with recessionary forces. When and if the Fed pivots, this change will create fear in the market.

Our team also notes that commercial real estate is a serious do-do. Commercial loans are much shorter in terms. At present, there is $1.7 trillion that needs financing. Now, with higher interest rates, many of these buildings will go bust. It is already happening. Brookfield, the largest office owner in downtown LA, just defaulted on two buildings. More will be coming. This also connects to banking who supplied these loans. Bottom line: The Federal Reserve creates inflation with cheap money and then destroys everything, especially the poor with their policy to correct their mistakes. We say, End the Fed!   Peace.

Trouble for King $Dollar

 When there are leaks in the dike, who are you going to call?

In the last section of our last posting, we noted an aspect of troubling news for the dollar. The grumpling is among trading nations at the US currency for its price due to actions of its central bank (Federal Reserve) has developed into action. We know that China is central to oppose the dollar because it is the foundation of world trade and especially, for commodities. China's ego wants that position and recognition. Even our allies complain. Many times this drama connects to foreign policy. Nevertheless, the waning of the power of King Dollar is happening.

BRICS

The alliance grounded by Russia and China also has India, Brazil and South Africa. They account for 40% of world trade. They are planning to introduce a common currency for their group and encourage other nations to trade with it.

It has started as China and Brazil trade each other's currency with each other. No dollars!

A new alliance is developing. At a conference called ASEAN. The group are seeking ways to detach from the dollar to trade among their region. They also opppose US allies and their currencies: Euro, Yen and British Pound. This is the Pacific Rim.

Saudi Arabia is seeking to trade more with the BRICS. They announced that they are open to join the Shanghai Cooperation Organization. This could be a death blow to the petrol dollar.

China pushes anyone who trades with it to trade with the yuan or China's money.

India has thrown its hat into the world trading market by offering to use its currency in world trade. (We see some conflict as China wants this status.) However, the annoncement is open opposition to the dollar.

Saudi Arabia is throwing more curve balls at the dollar. Recently, it agreed to accept an emerging nation currency (Kenya) for an oil trade.

These things are like an engineer's report on a dam. Areas are under stress. A leak could become a disaster. King $Dollar's position will not change overnight, but world action is in a trend that opposes the dollar as the world's reserve currency.

When our nation disregards the privilege of the dollar with excessive money printing that dances with debt, everyone holding dollars worries. At this time and in this space, we will not get into the dangers of the dollar being de-thrown. We all will be poore. In the meantime, we have the two world lending institutions: IMF and World Bank. 

Ego's Everywhere

The International Monetary Fund's purpose is to lend money to stabilize currencies. Their ego wants more. They have developed a non-currency called Special Drawing Rights (SDR). It is a basket of currencies. The US has the highest value ratio at 43%, but China is in the mix with 12%. They seek to have the dollar replaced with their SDR (currency) basket of value. 

World Bank lends money for projects like dams. Their record is terrible. Corruption steals millions with very little progress with their loans. China is big in this loan area. They take possession of a nation's collateral if that nation defaults. With corruption, this is a guarantee. China will eventually be hated for stealing valuable resources in nations around the world. A leopard cannot hide its markings. For now, this is another threat to the dollar. 

The biggest threat to the dollar is our money printing and our national debt. When your debt is 120% of your GDP, you are in do-do land. It gets worse every minute. Both of our political parties are guilty. The biggest sinner is the Fed. This is why we say, End the Fed!            Peace.

What's the Buzz? What's the Happening?

 -  Ah, gentlemen, you know why we are here                                                                                                 We've not much time, and quite a problem here.                                                                                         ...We need a more permanent solution to our problem...

- Andrew L. Webber

Market Outlook

In His honor, we submit the rock opera. Time changes, humans don't. The Bulls seek to regain control of the market. They want to capitalize on the dangers to the banking system to which could stop the Fed. The long awaited "pivot" is at hand, according to them. They also seized the date. We are in "window dressing" time and the end of the month. They do have some positives that could sway your thinking. We say, "No!" However, the decision is always yours to make. Let us look at the picture...

The Dow ended the market in a strong rally. With a short week due to Easter, they will seek to keep the market rising. We say that the real conviction will show itself if the Dow can pierce the 34,000 range. Keep in mind, that the month of March saw another new low and the volume is the strongest on down days.

The transports also rose. This is a strong sign for harmony in the market. However, the transports also hit a new low in March with heavy volume. Its test will be 15,000?

The SPX followed the two leaders in the New York exchange. Its real strength will be revealed if it can pierce 4300?

Nasdaq is the leader in the uptrend. It too has a test in its sight. It needs to surpass 13,000.

IWM, the smallcap is still the weakest link. Its firms are the hardest hit by the Fed's policies.

With all of the above, there are a few fundamentals to the charts. Have you looked at a new electric truck? Ford lists its F-150 at $61,000. Ouch! It is the same for all the carmakers. We already know that the biggest consumer expense, housing, has prices over half of our nation cannot meet. Can the other half afford a new car with the already high house costs? This does not bold well for the economy that is under inflation stress and the Fed placing higher interest rates to their budget.

At present, oil is bouncing. Where it goes is anyone's guess. As soon as you catch your breath with the sentence, OPEC and Russia agree on an oil cut. However, even with the uptick, it is still in consolidation range. It would have to pass $82.62 to show conviction. One reason why all the previous worries about supply did not come to pass was a simple aspect that Russia did not sell to the West, but China took all the supply. The West did not have the Chinese to compete as buyers. Enough supply to go around. With the late winter, we will have to wait for a clear signal as to where the oil price is going.

Meanwhile...

The present uptrend in the market could be traced to the falling dollar. Like we have said many times, the market moves opposite to the dollar. Now, the retracing dollar is giving the market breathing room. Keep in the back of your mind, dynamics can change as other factors come into play. We noticed one big disturbing bit of news. The BRICS alliance is calling for their members to put forth a new common currency for them to trade. We see this as a positive when you view the consequences of such a move. China has always wanted this as "...a more permanent solution to our problem..." We see it resulting in greed, anger, jealousy, disappointment and the second step in ending the Russia/China pact.

- No riots, no army, no fighting, no slogans...                                                                                                One thing I'll say -- Jesus is cool. Thank you, Andrew for Jesus Christ Superstar.   Happy Easter! Peace.

Odds and Ends: March 2023

- He, who controls the money supply, controls.

- Rothschild

We begin with the bandito, blindfolded, hands tied and standing before a blood stained wall. We hear a voice,

Listo, Apunta, Fuergo! (ready, aim, fire).

It is now legal in five states. With the claim that letal injection is inhumane and a limited supply with the fear of lawsuits, the old firing squad in back in vogue. The only thing that we see before the wall is small banks, small businesses, workers and consumers. Before we begin to look at the four categories, we must include this sad point.

Shootings vs. Train Derailments

If you count every train car in the recent derailments, it is a neck and neck race to death with school and public shootings. So much for the quality of life and giving thanks to God?

Now, we begin...

Small and Regional Banks...

...were set up by their own greedy nature and a perfect trap by the Federal Reserve. When a bank fails in the US, the Fed seeks a buyer. FDIC covers the regular depositors and the Federal Reserve covers the big guys. We say this all the time. One would think that since we have been right most of the time, that more people would back our call to End the Fed!      

Anyway, after the financial crisis of 2008, Congress passed the Dodd-Frank Bill. It is mostly BS, but it did touch a few strong points. Among those, is bank leverage. It got raised because banks can create money just like the Fed. It is based on their deposits. Say, you put $100 into ADIOS BANK. They can now lend $90 out. They created $90 dollars. Well, the small, regional firms yelled at Yellen, "This is not fair. We can't compete against the big boys. We can't make it!" The cry becomes a worry in what you wish for. Beware the...

Ides of March

On the 15th of March in 2020, the Fed granted the wish by small banks. They eliminated ALL bank reserve requirements for smaller banks. Yes, you read that right. These banks envisioned themselves as the next Goldman. They expanded, rapidly. Someone got worried. Maybe we should cover ourselves with bonds? They purchased "grenade bonds." They bought low yielding 3% bonds that blew up in their face as the Fed raised interest rates. They had a limited cash reserve. The run exposed their weakness. Enter the Fed.

In their machinations, they actually bailed out the big boys by declaring that they will buy up grenade bonds at full value. Would you buy something for a dollar when you knew you could purchase it elsewhere for .50 cents? This is how the Fed helps the money class. Not only that, they will divide the spoils among the big boys who now will grow through this "crisis?" 

It is the same everywhere that central banks control the money supply. Credit Suisse had a phony market cap of $8.51 billion on the day that they crashed. The home central bank was ready to cover all their losses with a $54 billion dollar loan. Could you get a loan for 7x your value? See, what we mean? Keep in mind, these are commercial loans are with a 7-year max and not a 30-year mortgage. Foreign nations make use of socialist concepts. It is why our capitalist firms are at a disadvantage. All their big corporations are backed by the government. This is why China is so formidable. 

As it turned out, they realized this BS manuever will be public knowledge. They covered their ass by "merging" the bank into UBS. Sri Lanka got saved by the IMF from defaulting. This is happening around the world, but kept behind the curtain. 

In a related story, Powell appears before Congress. He is asked by Congress-woman Lummis, "Is our level of debt borrowing sustainable?" He says, "Yes." By the way, our debt level is 120% of GDP. Very bad in our eyes. Will you join the meme? End the Fed!

Small Business...

will suffer due to higher loan costs, shortage of workers and consumers who will pullback due to inflation. At the same time, bigger firms are cutting jobs like Amazon and Accenture. Walmart is closing stores, ending the night shift and cutting jobs. These actions lead to delinquencies and evictions. You can see this aspect in the market in the IWM. This index is the hardest hit of all the market price movements. This also gives foreign firms more ground to expand within our nation. This is very bad in our eyes. 

Workers

We stated last year that this year we would see more strikes by workers. The LA school district starts off our prediction. It is happening in the UK and EU. Sadly, we see job cutting causing more pain. McKinsey announced 2,000 job cuts. Disney just laid off 7,000 to the growing number of firms cutting jobs like the ones mentioned above. We add that to our other prediction: evictions will be back in the news. Very bad in our eyes.

Consumers

they are pulling back with inflation. They somehow manage to make ends meet. With that said, too many are using their credit cards to get by. This is a serious cloud on the horizon. Not good.

One More Prediction?

In the nation of the Central African Republic, Chinese mine workers were shot and killed by alleged Russians. Their mine looted. China vows revenge. This will be the first mistrust of China with Russia. There will be more in the future. Someday, their alliance will bust just like the Russian/German deal before WWll. The Russians will beg the West to become friends again. We can only hope.  Peace.

"Scorecard! Get Your Scorecard!"

 In my love for my Bronx Bombers and a new baseball season, I give you my title story. Sadly, the subject matter is our economy. Last year, we told you that our economy is in a stealth recession. No one in the media follows our blog, and thus, the term and truth is not common knowledge. A quick recap.

Stagflation...

...is when inflation outpaces your individual standard of living like our present economy. One cannot make ends meet or slowly limits your future options. In the corporate world, it means inflation is higher than your projected assets and liabilities. You may not be able to meet your financial obligations or your future options are cancelled. This is the location of family households. This is the picture corporations see. 

The scorecard reads: 1) low savings, 2) record-high debt, 3) record-high credit card use and debt, 4) even with the recent upswing in wages, it never reached the livable wage level and 5) the economy is slowing.

These aspects point to delinquencies, repossessions and evictions. Our team is losing. Poor outlook.

Enter the Fed

These crooks only had hope in late 2021 that inflation would be a one-time, quick hit. They did nothing. When they could not ignore it anymore (2022) they stated their hope in one word to describe inflation, "transitory." No one calls them out except in these types of blogs. We are now the "writing on the subway walls." 

At that same time, employers found it difficult to get workers after COVID. In a sad, ironic twist, the Fed decided to fight inflation by hiking interest rates. Eventually, this will slow the economy as they make money expensive. Do they ever admit their mistake of making money cheap? Sorry, we already stated that no one calls them out.

Fed= now, a fireman, before the arsonist.

This change in money borrowing will result in layoffs. Small businesses will get another crushing blow. They were hit by imports and then, the pandemic. Higher rates and inflation will cause consumers to pullback on spending. Small business is dying a death of a thousand cuts. In late 2023, going out of business signs will be everywhere from main street to the last malls. It is not just the Fed, government does not protect workers or our economy. Stagflation will be the final nail to retail, to zombie firms, to a lower standard of living. 

In baseball, if your starting pitcher doesn't have it, you bring in the relief pitcher. In economic terms, it means unemployment. Studies show that for every 2% reduction in inflation, unemployment rises by 3.6%. The last reading at 6% implies that unemployment will reach 10.8% to get to 2% inflation. Remember this formula!

Behind the Curtain

Last month, job growth was stated to be 266,000 jobs, but unemployment ticked up to 3.6%. Didn't you find that difficult to understand? What is really means is this. It takes 150,000 to move the needle. What is not expressed by the media is we lost many more jobs that were created. You can do the math. 

Back to the sad twist of fate. By slowing the economy, jobs will become scarce. Employers problem? Solved. This will mean lower wages once again. This will result in another tick lower to our standard of living. We already know what that means: crime, homelessness, food banks and protest. People won't be working, they will be protesting. Do you know what happens after the protest stage? Civil unrest. They do not understand our problems start with the Fed. They grow with outsourcing. Our relief pitcher has an ERA of 6. It looks like a long season with a thinking of reality, "Maybe next year?" In economic terms, put tariffs on all imports! And, the most important, cut out the cancer, End the Fed!      Peace.

Two Truths

First Truth:

Let I, JFL begin by saying that I do not know how the Federal Reserve will help the banking industry who suffered more loses due to the collapse of two banking institutions last week, but I do know they will. The banks have also taken big losses due to the new, lower value of their past bond purchases. The Fed has many tools to play and use in their machinations. They might even create a new one? However, this will prove the point that we continuously make, the Federal Reserve is socialism for the banking industry. They cover their losses with your taxes and let them keep their profits under capitalism. 

The largest, Silicon Valley Bank had a value of $609 billion. It is vanished money. The Fed will not let their rich influencers go unaided. The second bank, Silvergate will not be as lucky. That bank backed crypto and at the moment, crypto is out, fiat still rules. 

On a side note, last week's piece mentioned that after big run-ups in the market, pullbacks expose fraud cases. You cannot even trust some of the guys who made the most money. They eventually get caught as crooks. Funny thing. A report released by Silicon Bank a few days before the collapse stated, "That the bank had $180 billion in liquidity." It throws another dagger into the American psych on trust. Not good.

There will be some contagion due to the severity of losses. Bank of America reports that last week, depositors took out $68 billion from banks. The run started with people seeking a higher yield than what banks offer. Bonds received most of the funds. This aspect will continue. Watch out for more revelations of trouble. Cathie Wood's ARK comes to mind.

How about this point that did not get reported? The central bank in the UK (Fed in England) got HSBC to buy Silicon's branch bank for one dollar. I'll say this, the crooks are brazen. Anyway...

While the Fed does their real purpose, the shills like "yellen" Yellen will use the media like a pulpit to announce that there is no financial danger. You should know the lie. You should join the meme, End the Fed!

Second Truth:

This blame goes to the greedy, arrogant money producers and owners. Their hatred of unions and disrespect for workers led them to the concept of outsourcing. Let it be known, not all producers are guilty. Many had to follow the way of outsourcing just to be able to compete in the marketplace. 

Consider all American firms got their riches, their brand known, their start from within the US. Do they appreciate our citizens? Do they show love by taking care of their workers? NO! A thousand No's!

It would take a whole book to list all the grievances against owners, but take this recent profile. Norfolk Southern will not give their help sick leave in a dangerous job. They cut safety corners and they fire workers who protest. They never invest in their business, but they do buybacks to keep shareholders happy. Amazon will fight against anyone who seeks to unionize their company. Musk follows this same format. Boeing sends work to southern states to weaken the union membership in Seattle. They also cut corners in safety. I'm tired and upset. I look around. Their greed has lowered the standard of living in the US. A large percentage of children go to school hungry. There is no money for schools. People are living in their cars, RV's or on the street. Crime results. Broken families cause more crime and burdens to society. Do I mention our internal struggles with color, religion and nationalities? A recent report says that half of our population cannot now, or maybe never, be able to purchase their own home. We know the reason. The Fed destroys the value of our dollar. Corporate destroys the middle-class by outsourcing. When, in the near future, that percentage reaches 60%, I predict a sad vision, civil unrest.

All the above and let us not forget that the original workers who helped establish our many companies, had their pensions stolen, (yes, we once had pensions) their kid's future stolen and their towns ruined. Now, years later, the seed of sin is revealed in the second truth. We read this from China who benefitted the most from outsourcing, "There will be CONFLICT if America stays on its present course by hurting the Chinese economy." We are under the threat of war due to placing tariffs on Chinese goods? The gall! The nerve! It does not get any better with the ego, fools in North Korea. They also said war is possible if we shoot down any of their test missiles? Well, are you going to let them fly a ballistic missile that reaches our West Coast? Shoot down any and every missile that goes over Japan, an island or anywhere near the US. We need a change in our military policy. Remove our troops from foreign bases and act like Teddy R. You mess with us and we will play stickball with your head! By the way, this is for the warmongering, idiot general on Russian TV who said, "Russia should attack the US East Coast with their Poseidon Nuclear Sub. It is unstoppable!" That is what Germany thought with their battleship, Bismarck. It sank! Sorry, Lord about the violent thoughts.  Peace.

Alert!    *****   Alert!   *****   Alert!   ***** --------------------------------------

Another "S" bank failed with rumors circulating about First Republic Bank, et al. The Fed is undaunted. We are also undaunted. We may not know what goes on behind the curtain, but we know action speaks lounder than words. Our call proves to be on the money. Read on...

We are not sure if we mentioned the next point before. Our weekly blog is generally written on Saturday with possible updates before publishing on Wednesday. Well, lo and behold! In this piece, we made one prediction on the Federal Reserve with another possible caveat. Dear Reader, both points came true even before this was published. The Fed created a new fund called, "Bank Term Funding Program." It will not only give loans to the banking industry, but the sneaky Fed also reassures the big boys that they will be protected with their treasury bond purchases. The Fed will purchase old bonds that are now only worth .80 cents on a dollar at a full one-dollar par value. Can you see why we are right to say, End the Fed!

Cloudy Window

If you regularly read our blog, you should know the term, "window dressing." For newbies, it means that the first few days of every month, new money is put into the market from funds. It is one reason why the market is biased to the up-side. With that said, last Wednesday (1st) was mostly down, but reversed. It closed with a plus 5-points in the Dow. Dear Reader, this demonstrates a very weak market. In the bullish case, the market did respond strongly the next two days. We, at Evolution feel that the market had many things to help produce a strong rally. In our estimation, it failed. The elevator is still going down. However, you decide. Here is the picture.

Positives

The Dow was heading to fall below its 200-day moving average. It held. Not only that, but all the indexes stayed above the dreaded line in the sand. By the way, the Transports were never close to piercing that marker. This is a big plus for the market. Will momentum carry into this week and month?

China revealed a strong return by its economy. This will help commodities, shipping, everything. We feel that China is the number one economy in the world. We are number two. That's how we see it. With China opening back up, it is like a high tide. It raises all boats. 

In the US, we passed the chips act and the stimulus for infrastructure. However, the money has not circulated or has had enough time to influence the two sectors. It should help both.

Coming into this month, the economy had a strong tailwind from the consumer. We mentioned that the three aspects for this is states raising its minimum wage law, the increase to social security and job switching by employees. At the moment, we see this as a neutral. 

Neutrals

Hanging with Doctor Copper shows it maintains its price around $4.00. The same could be said about oil. It seems to be forming a consolidation range. China's potential demand could change its direction.

Negatives

One would think that the strong labor reports with jobs would be a strength. It is not. Full-time labor has declined. Quality jobs are suffering layoffs. In the US, 800 more retail stores will be closing. The list includes big names like Walmart and Best Buy. Nordstrom is closing ALL of its Canadian stores. Every week, new names are added or announced. Facebook just announced more layoffs. This is not a strong economy. There are other clues. 

Evictions are back in the news. We feel this will be contagious as government protections have expired. Landlords are raising rents. Renters are using almost half of their income to meet this obligation. The same story will soon surface with housing. Home owners are barely scraping by to meet their obligations. State taxes, car insurance and utilities are not helping as they all are on the rise. Then, the automakers who offered incentives like delayed payments back in 2020 have seen delinquencies rise. People cannot afford the cost of a new car and a report says that one-half of the population cannot now and possibly ever, afford to buy their own home. This is sad and troubling. There are other reports revealing that consumer's are using their credit cards to make ends meet. This is a recipe for disaster. However, the data says this aspect is on the rise. 

When you add the war in Europe, geo-political problems, sabber rattling and other stupid forms of tension, the world is on edge. Then, we add the Federal Reserve who only make things worse by their arrogant, egotistical belief in engineering the economy. Their thinking is backwards. You do not worry about the richest class, but build your policy on how it effects the bottom class. If a poor person can get by, well, everyone else should too. Anyway, this is how we see it. 

Finally, the January barometer was down. The saying goes like this. If January is a plus, the chances favor a good year in the market. If it is down, it is more likely the year will be down. January was down.   Peace.