Connecting Dots

- Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.

- John Maynard Keynes

In last week's piece we informed you that our call for a "Stealth Recession" is still in play. This week we offer you supporting factors that will help you see our point.

Market

The latest really in the Dow and other indexes failed to hold on price. There is no conviction. Volume at the rally was low. This demonstrates the market is really building cause for its next move. The longer the market stays below resistance points and in consolidation, the bigger the next move will be.

Oil

The corrupt Fed may leave out the most important commodity in their inflation matrix, but you and I need it every day. The price of oil keeps rising as we mentioned last week. In addition, the energy sector under the XLE made a new all-time high last week. Inflation is not going away. In a related report, an alarming point about the excess spending by our government with the military as the biggest spender was released. This year the interest on our debt will surpass $663 billion. That unbelievable figure is set to double by 2028. Now, more than ever we need a balanced budget and the Fed ends! There are other ramifications that can be seen in the US and around the world.

In the US...

...another gift to the world from America, the movie industry is suffering. It is not the strike. It is the debasing of the currency. Ticket prices to see a flick are way too high. Our largest movie chain, AMC will soon join Radio Shack, 5&10 Woolworth in the netherworld of failed businesses. In the...

UK

One of their largest retail stores filed for bankruptcy. The 52 Wilko chain is gone - out of business. In...

Asia...

...mainly China, homeowners face this reality. The largest real estate company entered into bankruptcy. The second in size, Country Garden is following in their footsteps. Real Estate is 17% of the Chinese economy. It shows a common bond with the people of China and US citizens. The desire to own your own home.

In the US, the Fed causes home buyers to become the biggest obstacle. In China, the Communist Party as well as one of the oldest sins of man, greed. The party is seeking world domination with money. They spend their budget on buying resources, land and shipping ports. The US military squanders our lives and resources on military bases and weapons. They have over 100 military bases around the world. Why? You can call it anything you want, but this is a form of imperialism. This is wrong and it only causes antagonism against America. Neither government looks out for their citizens. The military is the biggest, most wasteful component in our budget. Back to China...greed shows itself in the real estate developers expansion plan. After they exhausted all the local banks in China, they turned offshore. Now, the Communist Party manipulated their currency, the yuan to keep it low versus the US and world currencies to push exports. The yuan should be the most expensive currency because China leads the world in manufacturing. It is the largest exporter and user of commodities. Their currency should be at the highest. Manipulation! Anyway, it is causing a backfire to real estate. Many of these loans are to American firms on processed in US dollars. Since the dollar is high, more yuan is needed to cover loan debt. This is basic economics. Your costs are rising and sales declining. Chinese firms are in do-doo thanks to their government's expansion plans that do little for citizens.   

Remember to keep your home. This crisis will pass and you will still have a roof over your head.                                                                        Peace. 

 

We Stand...

...by our call. 

Funny thing about time, it has a price like the thesis of Edward Chancellor in his work with the title name. His idea says time causes mistakes in setting targets like inflation. It seeks to assess the relationship between variables like supply and inflation that are stationary. They are not. Needless to say, the Fed does not like his theory.

I guess a Fidelity Strategist must have just read Chancellor's book. It announced last week that it sees a spark for a recession in 2024 due to a wall of corporate debt that is due and faces higher interest rates. The firm is not the only one, but these small voices are drowned out by the bulls who dominate the media.

3.8%...

...unemployment. Well, we gave you the math metrics that calculate the percentage. In real numbers, new jobs came in at 187,000. So, if one tick is 150,000, this means 787,000 loss work. This is a big jump from 3.4%. Time will reveal September's numbers. We do not feel that they will be good. At the same time, oil has broken through resistance. It could test $93 per barrel. This puts a burden on all citizens. This continues what we at Evolution have termed, "A Stealth Recession." While Powell talks, people suffer. When the pain hits the wealthy, then it will get a media meme name. We already gave it one. We just got a clue from a report by the Dallas Fed, of all people. It is in manufacturing. The data says....

1) Computer and electronic product manufacturing: Customers are reducing or cancelling orders due to soft demand. The volume of orders is down 51% year-over-year.                                                      2) Food manufacturing: There are fewer government contracts. Customer discretionary spending has declined.                                                                                                                                                        3) Machinery manufacturing: Slow. Phone not ringing. Projects are being postponed and payments late.                                                                                                                                                                4) Primary metal manufacturing: The industry says it is in a technical recession.                                  5) Printing and related activities: They are surviving due to previous large contracts. Nothing on the horizon.                                                                                                                                                          6) Transportation equipment manufacturing: Higher prices and interest rates are hurting.

We stand by our call.  Peace.                              

Odds and Ends: August 2023

- We become what we love and who we love shapes what we become.

- St. Calare of Assisi

Dear Reader, you should realize what has become of your purchasing power. You should further realize that the Fed is an institution to protect the banking industry and the wealthy. It is what they love. It is what they become.

You hear and read about it every day. When the UPS truck drivers get paid $49 per hour, our dollar becomes less in value. It is no wonder that the UAW has voted to strike. Think about it? They are saying if a truck driver gets that much, how much more are we worth? We build trucks! Here, at Evolution, we called this development by workers seeking more money last January. We do not take joy in being correct in our call. We worry for low-wage earners, for seniors and for small businesses. 

Meanwhile...

the market shills are calling for another bull market. They declare that the Fed will stop raising interest rates. They dare to say that the consumer is resilient. I guess that they did not read our piece last week. When consumer debt on credit cards passes $one trillion and for the first time, more consumers roll over their debt on credit cards rather than paying the full amount, this is an economic fire. When more banks (5) are downgraded by the ratings service firms (Moody), the banking contagion has not gone away. When in China, the biggest real estate firm, Evergrande files for bankruptcy (we called it) and a variety of other factors all point downward, do not be misled. When you view the charts of the big indexes, you will begin to see what we see.

Indu, Spy and Tran...

All retraced to their last breakout point. This is not the price action of a bull market. Consider these two large footwear firms, Nike and Footlocker. They are included in the Fed's consumer retail formula for inflation. Even though our population is growing, these two giants are sinking in the value of their stock. Not a good omen. 

Other Factors

We used the term. Here is the most important consumer purchase, a home. With mortgage rates over 7%, applications have fallen off the page. Home buying is the least affordable it has been in 40 years. Zillow is seeking to help with a 1% down payment loan for first-time home buyers. This is good and bad. It is nice to help, but again our lower purchasing power in the dollar has caused prices to reach unaffordable levels. Then, we read this...

Panama Canal...

has a back log of ships on both sides. The reason is the slow service. The reason for slow service is drought. These small-minded chaps who operate the canal had no vision to store water to cover a drought situation. What this means is there are fewer products on shelves and the cost to put things back on the shelf will cost more. Definitely not good. By the way, China is now the owner of the canal. Is this political? Who gets hurt more by the poor operation of the canal? We do. Enough said.

BRICS

They added six more nations to their pact. What this means to us here at Evolution is this: End the pentagon's control of our budget and cut military spending. Put more tariffs on all imports and pass a balance budget amendment. Take politics out of economics. A strong dollar helps the poorest in our nation. When you help the least, everything else will fall in place, including keeping the dollar as the reserved currency.  

Good News

Although home buying is the least affordable it has been in nearly 40 years, Zillow is seeking to help with a 1% loan payment for first-time home buyers.

The government finally did something against these punk-ass, weasels who steal from people and companies. They made a cyber arrest. I would like to see news like this at least once a month. Then, these federal workers will finally earn their paycheck. We don't need photo moments like in drug busts. We need more crack-downs and busts. Thank you. 

A small firm in Grand Rapids, Michigan called, "Battelle" can clean dirty water, especially if it contains dangerous plastic residue like PFAS. Yay!!   

- Be gracious to us, O Lord, for we are in distress.

- Psalm 31: 9

God, bring consolation and relief to Maui.   Peace.

Words: Resilient, Manipulation

 The word resilient was in the news last week, repeatedly. It got connected to the spending of the consumer. Even with data showing that consumers have breached the trillion-dollar level in credit card debt, retail sales came in positive for July. We say the word is misused when they use it because it lacks its real connecting partner, manipulation. If you continue, you will see our proof.

Retail Sales

How is this data gathered? What are the components? Where's the manipulation? The government uses this index: food, clothing and textiles, footwear, jewelry and small stores. You noticed that Sebastian put the first component in bold lettering. Think why? The Federal Reserve does not include for inflation the three things that all of us need every day: food, energy and shelter. And yet, to make the economy appear strong, it appears under retail sales. 

Dear Reader, it not only appears, but we, at Evolution dare to say that it comprises almost 90% of the index. We do not buy new shoes or sneakers every month. We hardly buy jewelry. Clothing sales are mostly seasonal spending, but we all have to eat every day. How do they gather small store info? See the hypocrisy? This is manipulation. It gets worse. Consider the aspect that within each sale is price. Inflation buffers price. For example, in prior years a dozen eggs cost $1.00. The store sold three. Now, you pay $1.50 per dozen. The store sold two. Total sales are the same, but actually fewer products are sold. The real corollary to resilient is the next letter after "r". It is "s" for survivor. The consumer survives by seeking to avoid inflation. The total sales number masks the point that consumers are buying less. The best way to understand this point is the present big movie hit, "Barbie." It is now the best grossing picture. However, if you count ticket sales, it is far less than the original Tom Cruise flick, "Maverick." Today, a ticket runs $10 bucks or more. The ticket price was $5 at one time. Now, do you see our point? The lies of manipulation keep on coming. Many large supermarket chains also sell gas like Walmart and Cosco. So, another item that the Fed does not use is included in retail. End the Fed!

Manipulation...

...is the cornerstone word for the Fed and government agencies. Remember, every administration gets to appoint people to positions in government. They are puppets. Our biggest dislike is the report on labor. The government says it is 3.4%. We say that is BS!

You get a real picture of our economy when you know the number of workers out of the population of working age people. The rate for this year is steady at 62.6%. This data informs you that unemployment is well over 3.4%. Back in the 90s, participation levels were over 66%. By the way, just one tick means around 150,000 people. Part-time work is just existing, not living. Self-employed are a huge segment. Consider a realtor? This person has a job, but if he does not sell a home, he has no income. These examples manipulate the stats. This BS started during the Depression. The great comedy team of Abbot and Costello brought the subject to light. Sadly, we do not have anyone who challenges our government except a few blogs. With that said, we have two lists of jobs. The first reveals the lie of the retail report. The second is like a dawn with an approaching sunny day.

Pink Slips:

 Data Scientist: employers hire for one project and done.                                                                             Soft wear Engineer: There is more help than jobs.                                                                                       UX Designer: AI is showing them the door.                                                                                                 Customer Support: Another AI casualty.                                                                                                       Warehouse: Slower spending, less inventory needs and automation.                                                           Transportation: The rise of Uber and other forms of movement like auto-drive, a shakeout appears.         E-Commerce Builders: The pandemic need is over. Excess workers for demand.                                       Construction: Higher rates will cause a slowdown and layoffs.                                                                   Technology Leads: Recruiting has more people than demand. Basic rules of supply and demand.

Hiring

The labor picture is not all bad. The UPS deal shows extremely high wages for drivers. There are other fields that need help. We have a few.

 EMT: The emergency medical technician field is growing, but it lacks workers.                                         Programming: Robotics cannot solve human issues.                                                                                     Farm Labor: The pay is better than you realize and the help sign is everywhere.                                       Construction Boss: Jack of all trades is always in demand.                                                                           Nurse: The pay is getting better and the need is rising with the Boomers.                                                   Child-Care: The pay is terrible. The need is great. It is the same for restaurant workers, bartenders, truck drivers, dispatchers, dog groomers and all things that make our life better. When the government changes its approach to the economy by worrying about the least and not the haves, only then will we have a better society.   Peace        

Numbers

- The grace of our Lord Jesus Christ be with you all. Amen.

- Revelations 22:21

Jackson Hole

The Fed now uses this vacation forum as a pulpit. It is coming, soon. They will use numbers to manipulate. No one will challenge their data. These banking criminals are treated like gods in the ancient world. We don't. The only numbers that are worthy of higher adulation are scripture verses. With that said, we will now take a look at the recent numbers in reports and the market.

INDU: The best days show that up volume is the strongest on a weekly chart, but the daily shows more strength on down days. This is slightly bullish.

SPX: The best volume day is up, but the price level (3808) is way below the current market = confusion.

Tran: Volume strength is decidedly downward. According to Dow Theory, both the industrials and transportation must be in harmony in a direction to determine where the market is heading. This says the market is lacking direction in one way or the other.

Compq: Has led the market up, but it appears to be leading it down. Volume strength is equal in both directions. However, high evaluations will test investors convictions. 

Dr. Copper: The need is there, but at the moment, the price is in a downtrend. Copper will find support at $3.20, but with inflation, the miners will not like that level. 

Gold: We told you that this is the season for metal. The best days in volume are up. At the moment, gold is retesting the support at $1900. We see gold hitting $2100 - very soon.

Oil: It is within reach of breaching its last high. It appears that $94 is the next resistance level. This will be inflationary, but the Fed does not include the most important commodity in its matrix. It is another reason why we say, "End the Fed!"

King $Dollar: It has resistance at 105 and support at 99. If it stays up, this will limit inflation, but if it declines, another wave of inflation will hit everyone.

Other Stats

Stats is the best way to use numbers to influence and manipulate. We like to look at the root of who is citing numbers and stats. Warren Buffett uses the Wilshire 5000 index and divides it by the annual US GDP. The result is not looking good.

Consumer credit card balances leaped over $one trillion. This is also not good. 

Auto makers cannot solve the electric weight solution. Car bloat is their problem. New vehicles average 4329 pounds. This is 1,000 pounds higher than 1980. Besides being dangerous for smaller autos, it uses too many resources and becomes too expensive. There are many other uses for numbers like the banking industry is setting aside big money numbers due to losses in loans and government notes. Climate numbers, food costs and housing all point to problems. The real question is what numbers get addressed?   Peace. 

Signs

- Sign, sign - Everywhere a sign                                                                                                                      Blockin' out the scenery                                                                                                                                Breakin' my mind                                                                                                                                          Do this, don't do that                                                                                                                                      Can't you read the sign?

- Five Man Electrical Band

King $Dollar

It gave us a sign as it is bouncing upward. It could hit 104. This will negate higher oil prices and higher import prices that appeared to be coming in August. This is happening even after the ratings service Fitch downgraded the US debt. The last rate hike by the Fed might have saved their ass...for now.

However, the dollar and the US economy have other problems and these will not disappear overnight. Of course, the shills will deny. Jamie Dimon of JP Morgan Chase who said about the downgrade, "It doesn't matter." It does and I give thanks to this agency for having the guts to make this call. We need a balanced budget among many other issues to be remedied. Then, we noticed these signs that are like a dark cloud coming our way.

Charts: They are taking the escalator up and the elevator down. Translation: higher volume on down days.

Layoffs: Anheuser-Busch announced pink slips. AT&T thought this was a party and they joined. Layoffs are up this year by 244% over last year. We could add the sad saga of Yellow Trucking and their 37,000 people. The firm averaged 49K shipments per day in 2022. It dropped this year to 10/15K per day. In our continual dispute with the unemployment figures, we offer this: full-time employment fell by 585,000 in July. There are jobs and there is BS. Job losses are a lagging piece of data. Shipping is a huge indicator of the health of an economy. You also can get a connection through cardboard use. It is down. In a related aspect, stores and plants are closing.

Corporate Debt: Defaults have already exceeded 2022 and now, interest rates are even higher. 

Inflation: It is bad enough that the Fed's BS gets away from not including the three things' people need every day (food, energy, shelter), but no one mentions other aspects that inflation has affected such as, auto repair. The costs are up 20% year-over-year. There are others, but space is limited.

Household Debt: Consumer's credit card debt just passed one $trillion. Many struggle to meet shelter costs which keep on rising. In LA, CA, more than 768,000 households are behind on rent. Evictions are coming and not just in LA. Homeowners are also feeling the pain of higher interest rates. Foreclosures are coming. The estimate is 186,000 will join the homeless along with the evicted renters.

EVs: They are the wave of the future, but at the moment, not cost effective. Ford and Lucid lose money on every ev vehicle that they sell. What other auto-makers are not revealing about this point? Ford says it will lose $45B on electric vehicles this year.

Yield Curve: It has been inverted way too long and the spread has not changed. In a related aspect, Moody's downgraded 10 banks and are looking into downgrading a few more. So much for the Fed's stress test.

Commercial Real Estate: This segment is already in recession and approaching depression. Hey, Jamie, "It does matter!"

Strikes: We wrote over a year ago that strikes would be coming due mostly to inflation, but there are other factors. We repeated the alert last January. We also told you that this aspect would rekindle inflation, especially when government unions entered the scene. It is happening as you read this piece. Of course, the Fed controls the media. The question is how they will address the strikers, unions and workers in general. Look for the signs.

"...signs, signs, everywhere a sign. Can you read the sign?"  Peace.

Odds and Ends: July 2023

 Right and Wrong

We called the rate hike by the Federal Reserve last week, but our overall call about the recession has an obstacle. This could make our "stealth" recession into a full recession call wrong. The SPX is starting to form a reverse head and shoulders pattern. If it does, the Bulls will be singing. Fibonacci price projections could send the index 110 points higher to 5700. However, head fakes do happen and we stand by our call. 

One Strong Reason...

...why we are standing firm is this revelation from the banking industry. They are putting aside money to cover loan losses in commercial real estate and from bond holdings (prior lower rate issues). By the way, the Fed's rate hikes are causing havoc to our national debt figures. They are ballooning. We are watching the dollar. It is forming a new consolidation range from 105 to 99. Keep in mind, at the end of consolidation, big price swings happen. There are other factors like the challenge to King Dollar by the BRICS. We got news on their currency expectation...

Gold Backed Currency...

...by the BRICS is officially off the table. The central point about a true gold currency is the ability to convert those dollars for gold. These people will never agree to giving up their gold. This ends the threat to the USD for now. It is not all good news. There are over 40 nations seeking to join the BRICS. This reveals a lot of resentment over the dollar.

Singapore Blues...

...the small, so-called city state puts a premium on land. Real estate is expensive and the latest news has got people singing the blues. Two large real estate firms, Dalian Wanda Group and County Garden both need financing or they may go bust. People love owning their own homes, but greed always enters when money is involved. Remember just last year the largest real estate firm in China, Evergrande defaulted. Not much news has been forthcoming. It is a back-room deal that keeps the company operating. Then, we hear another large Chinese real estate firm, Greenland also needs financial help. We would like to make a suggestion, but we will admit our knowledge, especially when it relates to their culture, is limited. 

We suggest, leave Singapore for the island of Matsu. Singapore will suffer for a lack of free choices like Hong Kong due to Communist control. The island use to be a large fishing port, but modern trawlers have changed the landscape. Now, there are many abandoned homes and the island has many needs like doctors, mechanics, etc. The people will feed and house you for free during their festival. You can sell your property high and live there cheaply while you start your own business. Just an idea.

Poor Nation?

UK. The newspaper, the Telegraph, stated this point. They show how the average standard of living cannot even compete with Serbia. The English may end up asking Ireland for help. Our point here is the US is going down this same road. It takes a yearly salary of over $64K to purchase a starter home. Don't be fooled by stats declaring the average income of $58K. They are skewed. The majority of the population makes around $35K per year. 

Good News...

...American football is just one month away. Go Niners! Peace.