Rate Cut, No Cut...

You can sing the title to The Beat Goes On. You can feel the consequences of the Federal Reserve long before Jerome Powell's infamous, "Inflation is transitory." Next line, "Cost up, cost down..."

Walgreens says the higher interest rates along with high inflation as well as labor problems is driving up costs. It is leading them to close a "lot" of stores this year. They do not see costs coming down. You can see the consequences of cost cutting by firms. The first in line is labor. This can be seen in the recent uptick in unemployment to 4.1%. Next line, "I want, Give me..."

[Dust to dust= 3,200 stores have gone and we are only at the halfway point in the year.]

JP MorganChase warns that if banking does not get what it wants, 86 million checking accounts will see you pay for your checking services. I already pay to have my checks printed and I must keep a high balance so the bank does not add fees, but it is never enough. Refrain line, "I'm pissed! It never ends!" 

Marianne Lake, the head of Chase bank also says that debit and credit card fees will be charged in all transactions. Now, everyone will be pissed. Time to repeat the refrain, "I'm pissed! It never ends!"

This is about "capping" bank fees and the greed of banking. Banks should be regulated like a utility. Of course, the Fed will come to their recue and bottom line.

Rate Cut, No Cut...

The phony Federal Reserve with their BS mandate never mentions this aspect about labor, although they take a bow in saying that historically, unemployment is low. Full time labor has been flat since 2002. The gains in the job market have been mostly in part-time help. Why, you may ask? Because there is no benefits to add in costs. There will never be a pay raise and together spells no promotion and no social mobility. You can find some exceptions like the drivers for UPS, but that was mainly due to retirement of baby boomers and the scarcity of replacement workers. Of course, management cries out their Ab-lib line, "Costs up, Rate up..."  

With that said, their favorite song line is, "I want, Give me..."

Song ends. Flipside, "Summertime Blues."

There is an interesting chart that shows for the last twelve years, the market has seen a top during the Summer and a low in the Fall. Keep in mind, trading is light on Monday and Friday during this period. We still see a sharp pullback. It is approaching. The market is over-bought and the CAPE is too high. Be warned. Be prepared. Last song for the week. It is my favorite and now, a meme, End the Fed!"   Peace.

State, After the Fourth

Thank you, Founders and Veterans

We can thank one of our founders, John Adams for the concept to make our independence day a day to celebrate our freedom. Thank you, buddy. Our veterans deserve a better nation. Our country has two elderly men running to lead us. One could ascertain that men of age and experience would be good choices, but politics gets in the way. The two men will seek to use the playbook of throwing money at any problem. That is central to our problem. The deficit, full of wasteful spending, is leading us to inflation, poverty and division. This is not good, espcially since our nation is the poster child for democracy with a non-homogeneous population.

One aspect to spend is being displayed by Trump. He wants to control the Federal Reserve. He wants it  to be part of the Executive Branch. This is a no-no. The constitution says that Congress will control the purse. The Federalist Papers warns that if the three branches are of one spirit (party) that will lead to tyranny.

Biden does things for voting blocks to gain their vote. His student forgiveness is a sin. With these type of leaders, it is no wonder the nation suffered a terrible blow from the Supreme Court who are appointed by the Executive Branch.

Snyder v. US

The court case of a private firm giving money and gifts to the Mayor for giving the company a local contract. Sounds like bribery? The court reversed a lower court decision by saying you can give government officials gifts if they do something that you approve of, but only after the fact. Yeah, right! So, you meet Sunday afternoon. Crooked firm says to the official, you vote this way on Monday. On Tuesday, meet me at the auto dealership and pick out any one that you like. This decision legalizes bribery. This is corruption! Ironically, it is statue code 666. Nothing like the devil front and center. Our nation needs my unpublished book more than ever. It has the answer. By the way, any Libertarians reading this should wake up to reality. This is why you need government watchdogs. The only problem is they become bureaucratic. Maybe a watchdog to watch the watchdog with the power to remove or replace based on merit?

Market Call

We said in our last piece that the market appears ready for a pullback, but not until after the Fourth. We are more convinced this will happen. We note that the Fed's chair, Powell stated that the banks are in good shape. We do not believe. We read that bankruptcies increased by 18% in 2023. If one looks around, there does not appear any consequences of these business failures. One reason is the Fed keeps providing credit to keep these zombie companies floating by purchasing corporate debt bonds. Another worry is commercial real estate debt that banks hold. The value is declining and this puts derivatives and loans in question.

Falls Under Transports and Inflation

According to Dow Theory the two main indexes, Industrials and Transports must be in sync for a true market rally. This is not the case. The S&P 500 is misleading. In a related aspect, AirBus and Boeing are not meeting plane orders. This translates to less seats for airlines, which translates to higher prices, to which adds to inflation.

Cargo shipping costs are rising. One factor is the danger passing Yemen and the other is water shortage in the Panama Canal. Vessels are going the long way. This adds to fuel costs and chain supply delays. One example: Last June, shipping costs from Shanghai to New York was $2000 per container. Now, it is $8000 per container. Ouch!

Where is Disinflation?

The phony economists warn that we could enter a disinflationary cycle. Well, we, at Evolution say this is just BS! Data shows that in 2023, US production exceeded consumption. Prices did not come down. In addition, this reveals that the consumer is maxed out. The growth of 1.4% in the last quarterly report on GDP is also misleading. The growth was due to military spending to aid Israel and Ukraine. We support Ukraine, but we are against further aid to Israel until the PM is replaced with someone like Golan that gives peace a chance. With that said, enjoy our freedom and have a wonderful Fourth of July.  Peace.

Odds and Ends: June 2024

 - The most powerful weapon to conquer the devil is humility. As he does not know at all how to                  employ it, neither does he know how to defend himself from it.

- Saint Vincent de Paul

The US had streaks of humility and periods of ego. The pendulum is making the devil smile as the military has a strong grip on our government. We are not alone. North Korea and Russia embody the word. Netanyahu has Israel deep in ego with the false flag of doing whatever it takes to defend itself. They do have hope. A moderate leader has emerged. Yair Golan will work for peace. He has the rightful concerns for security for Israel. Peace is a two-way street. Palestine, if given recogition as a free state, must arrest any zealot against Israel. If they want to live, they must also let live. This is the way towards peace and end the reign of the devil. 

Other Devils

The consumer is using a debt vehicle in shadow banking. Firms like Pay Pal have a plan for the consumer to "buy now and pay later." Interest payments are high and consumers using this loan are falling behind. Data is not accurate or known. It is only estimated. The figure of $50 billion is thrown around. If correct, that translates to one in three US households. We, at Evolution fear an unpleasant surprise is coming.

Enter the Fed

The Fed watches the above loans as well as all debt liabilities. Quietly, they have pushed our too big to fail banking institutions to process a "Living Will." If an unpleasant surprise happens to one of these firms, they must have a plan whereby their assets and liabilities will be "moved along." The Fed just reviewed the banks plan and they are unhappy. More news will be forthcoming. Negative commercial loans and derivatives could be causing a serious problem behind closed doors.

Speaking of which...

it must be nice to have in your banking firm a partner, Beth Hammock who is about to leave to take a position in the Fed. The corruption of big banks like Goldman Sachs has been going on for over 100 years. Of course, the poster child is JP Morgan Chase.

Meanwhile...

summer trading is in effect. That means there will be low volume on Monday and Friday. The market is showing signs that the Bulls have no more juice. Techs are retracing. We get a more definite indicator with King Dollar. It is rising. Last Friday it closed at 105.44. It is in its higher range. Commodities and the market do not like a strong dollar. It appears to want to test its last high at 107. If it does, look out below. With the national holiday approaching, we expect the change in direction after the Fourth.

During this interlude, be aware that the etf, XLK will reassess Apple and Nvidia. They will sell a lot of Apple and buy a lot of Nvidia. This well make some volatility. Then of course, this is campaign time...

"Yellen" Yellen

She is using her pulpit position to campaign for Biden. We got a laugh out of her latest rant. She says, "Biden is seeking to address the area of inflation." She goes on to admit this has been a problem, especially in healthcare costs, energy costs and housing costs. Can you see the irony in this past Fed Chief? Two of the three concerns are not included in the matrix formula of the Fed. Ha! Ha!

Sadly, the joke fades and this reality comes to the forefront. Deficit spending by both political parties and candidates is so bad that at the present rate, the US will reach a point in the 2034 budget that the interest alone will exceed the whole budget of 2006. Try not to ponder that too long. It will give room for the devil. So, I say in humility, peace. 

Feel Good Psyche

 - It is better to look good than feel good.

- Billy Crytal as Fernando Lamas on TV.

Well, the sketch from SNL got a twist by Bill Clinton as he campaigned for the presidency. He said, "It's the economy, stupid!" Years later, he refined the statement to affect your emotion. In helping his fellow Democrat, Obama seek reelection under a difficult economy, he told him to use positive economic messages in the media. It worked. Today, Biden is trying the same technique under a difficult economy. Trump says the economy would be better under him. Whomever wins will employ the same principle, "Spend!" Neither has a vision. They do bandaids. Biden did well with his chip bill and the cleanup with the bridge in Baltimore. Trump enacted the first tariffs, but they were only tokens to fulfill his campaign promise. Meanwhile, we notice some aspects that will not leave us not feeling well if they cause an unpleasant surprise. The most alarming and dangerous took place last week.

End of Petro-dollars

Saudi Arabia is ending the petrodollar agreement with the US. This means the most inportant commodity, oil will no longer be priced in US dollars. Saudi Arabia joined the BRICS who are seeking to stop the dollar from being the world's reserve currency. Saudi Arabia is supplying the first nail for the dollars coffin. However, they are also keeping ties by joining a pact to formulate peace in the Middle East.

Enter: Strategic Alliance Agreement. This partners with the US and Isreal under a nuclear pact. One aspect of the deal is to allow Palestine to be recognized as a state. Meanwhile,

We mentioned above how Biden is putting out messages that things are getting better and they are not as bad as perceived. One way to use data to support those statements is to mention the unemployment rate and job growth. What we are seeing is possible corruption and a no doubt manipulation of the labor data. This is shades of Bill Clinton. The recent reports by the BLS all seem to project a huge creation of jobs only to be revised downward under the radar. In June of 2023 (one year ago) the report stated 209,000 new jobs. Turns out there were only 105,000 new jobs. That number is under our population growth. We need 150,000 jobs to stay even with population. The unemplyment rate shoud have ticked higher, but it did not. In fact, the data reported by the BLS has been revised downward 10 of the last 12 issues. The message to "feel good" does not hold because everyone goes to the grocery store and knows that a dozen eggs cost 50% more. Meanwhile,

We hear Chairman Powell of the Fed give us another "transitory" quote. Remember he said in January 2022, "Inflation is just transitory." Now, he says, "The banking system is in a good place." I guess Powell does not read the news like we have been mentioning in commercial real estate. We have another example. Blackstone, who publically says this is a great time to buy real estate, has quietly sold a large New York office building to KKR. Get this, they had to offer financing along with a low price to push the deal through. The banks would not touch the deal nor the buyer with high interest rates.

Recessions and Fraud

If you do a quick check on recessions, one thing always appears, a fraud scheme is exposed. Well, there is a Texas bank, USAA that is being suspect in the news. There were 4,119 complaints against the bank just last year. The bank also suffered a "data" breach. More news will be forthcoming.

Sell Short

This is not a recommendation to sell short, Tesla, but the owner did. Musk took 10% of the companies value for himself. I bet he feels good? However, those who have stock in the CAC do not. The index dropped to the same level as July 2023. With the Olympics coming, along with Bastille Day and a snap election, the smiles will be in doubt. Hope things turn for the better.

Finally, Some Relief

There is some feel good news with the summer heat. Try going to your local park. The trees give off clean oxygen and shade to rest. Some new ideas are also emerging. Parks are adding misters that spray the mist of cool water. New designs are constructing breezeways that are 10 degrees cooler. The wonderful ideas that keep coming from Singapore. They add cold tubing in their parks. Under a pavilion a line of tubes filled with cold water are added. They attract the heat from people to the pipes and somehow, the area gets cooler. Great stuff as the aspect to have all park roofs use reflective paneling and throw in some solar to cut the cost of street lighting.  Peace.

Signs of Reckoning

- A budget deficit is inflationary if, and only if, it is financed by printing money.

- Milton Friedman

When you realize how true the observation by Friedman is, it is amazing that the US dollar is still the world's reserve currency. We have run deficits forever and financed them by printing money. It is also no wonder that he does not get the recognition that he deserves. Why, you ask? His wisdom goes against the status quo, the Federal Reserve, the military machine and both political parties. 

Market Signs

The health of the stock market seems to be the indicator for Americans. Many have their retirement nest egg involved within it in one way or another. The politicians know this point. They use it as a pro or nay depending on which party is in power or local politics dictate. Each party has their claws in some segment of the media to acknowledge their position. At Evolution, we only have this blog site. Our agenda is truth. As faithful readers, you give us that credence. Thank you. Anyway, we saw signs in the market as well as on the street. They are pointing to what we dclared in January of 2022. We are in a stagflation economy. We called it a "Stealth Recesssion." The market does not acknowledge it, but ordinary citizens know it.

S&P 500

The index continues higher. The Bulls are in charge as we have noted in recent pieces. We also told you in the year ahead forecast that the "experts" called for a down first half of a year in 2024 and a big upswing in the second half. The question is their analysis a self-fulfilling prophecy? We saw some signs that the market is beginning to see what we saw back in early 2022. There are less and less stocks paricipating in rallies. The index sways the price action. This is a form of manipulation. The S&P pushed over 5350, but it could not hold price. This is the line in the sand for a continued rally, deep consolidation or a fall. 

Bonds

The 10-year is at 4.43%. It is trending higher. This is not a good sign for the stock market. Your money is safer in good paying bonds.

King $Dollar

It touched the confluence point of 103.5, but held. It immediately rallied higher. One aspect is the ECB cut their interest rate by a quarter point. Since the US is higher, this attracts money. It could also explain the dramatic drop in precious metals on Friday? The Fed will probably pause again, later today. This will be key. The dollar's fall is the first test of the crucial level. There will be a retest. The results will determine the market action. If the dollar remains strong, the market won't.

Meanwhile...

The unemployment report showed a big swing to higher levels. It reached 4%. It broke the streak of 20 consecutive months at or below that low figure. Trump, by the way, had a streak of 24-months. Neither matters.

What we have included from time-to-time is bankrupcy data. The retail sector overexpanded in the 1990s. At the time many factory workers lost their job, but they found work in the service sector. The pay was poor as it still is. The outlook was terrible as it still is, but it put food on the table and paid the rent. Now, it no longer can pay the rent because money printing by the Fed keeps destroying the purchasing power of the dollar. Food comes from food banks. This is unsustainable for ordinary citizens. 

At the end of each month the Fed holds its breath. They know and worry about commercial real estate meeting debt obligations. The latest news is not encouraging. A New York landlord annouced the sale of an office building at a 67% discount. In Hong Kong downtown property could lose $270 billion in value. London is also having problems.

Also, the continuing retail catastrophe. The over-building has long past the retracement level. Now, the consumer cannot afford to buy anything. Retail firm after retail firm are going out of business as they close stores to stop the bleeding. Sadly, we watch Under Armour and Rite Aid. The two will soon join Radio Shack whenever bankruptcy puts the last nail in the coffin. The count is 3,200 retail stores have already closed this year and we are only at halftime. Keep in mind this point, both poltical parties are guilty and the first thing that needs to be done is end the crooked cabal. End the Fed!  Peace.

Where's Character?

- "It's not whether you get knocked down; it's whether you get up...Everybody fails, but the people who succeed in the end are the ones who are relentless and learn from getting knocked down." 

- Vince Lombardi

The great football coach was talking not only about football, but life. If you lost your job at Foxtrot due to their closing all 35 locations or the Steward Health Care firm that closed 31 facilities, what do you do? There are many other examples. It is not just a loss of income, sometimes life happens. It could be a car accident? It could be your marriage? It could be a ferry sinking in Afghanistan. It could be a trial verdict? 

Where's Your Character?

There was a murder trial in Boise, Idaho. Chad Daybell was found guilty in all 3 charges. The judge did not allow cameras in the court room. The defendent was not allowed to talk to the press about the trial nor the jury. This happens in many largly known cases. 

Donald Trump stated before the trial that he would testify. He didn't. Lawyers usually do not want their client to take the stand when their case is weak or their client has poor composure. I repeat. Trump did not take the stand. He was told not to talk about the case. He did. He was fined, He cries, "No freedom of speech. I'm a political prisoner!" He knew that he would lose the case. He was setting the tone in the public's eye that he is a victim and he did not receive justice. He also knew that being a influential citizen and a first-time offender that he will probably receive probation. He has no redeeming character traits and he wants to be president. 

In Hong Kong there was a trial of 16 pro-democracy demonstrators. The government (read China) passed a national security law. The government claimed that these protestors violated the law and caused domestic disturbance. The court found 14 guilty. They could receive 30-years in jail. Two were acquitted. The prosecution seeks an appeal trial to get the two acquitted in jail. A protestor, Emily Lau says, "The law does not allow assembly or any demonstration of any kind." This is life in Communist China. These people definitely show true character. Say a prayer for them and Emily.

Elections

The election in South Africa ended the 30-year majority of the ANC party. The people had enough character to seek change. Here in the US, we do not have the courage, faith or character to vote for a new political party when deep inside we know that both of our political parties are corrupt with poor leaders with no vision or character. 

We vote for the lesser of two evils. Biden forgives student loans to buy votes. He has a weak border policy to attract the Spanish vote. He takes union votes for granted as well as black votes. He rides this historic policy of the Democractic Party when in reality the democrats only turned to the black voters and union voters because the Republicans were known to oppose these two groups. 

Trump only offers token gestures like his tariff acts. His tax cut is a code for the rich. Ordinary citizens will receive a $100 while the rich will receive a $100,000. His policies are no different than Biden's. He will spend and drive up our debt like his first term. By the way, his call to reduce social security goes back to the formation of the agency. Republicans were against it then and this shows that they still are opposed to workers paying into a system that keeps them out of poverty in their old age. His call for the executive branch to control the Federal Reserve is tyranny according to the Federalist Papers when our nation was seeking ratification of the constitution. 

We, at Evolution do not vote. We will not give either party a validation to govern. We have said this many times. We need a new third party. We suggest the "Liberty Party." The platform is government that operates for the general welfare. This translates to protection of American products and workers. We are not the world's police force. Cut the military spending. Use the money for ourselves and pay off the debt. Free trade is a code for the status quo. Nations use our country as a dumping ground for their economies. Our nation needs to return to self-sufficiency. We are not against trade. You utilize trade when you need something that you cannot make or make at this moment. This requires protection against foreign subsidised firms. We need tariffs high to be able to reach American made products with at least 40% share of our market place. This is how you make America first.

Corporate Character

We are losing it as fast as we outsource. One only has to look at Boeing and how far they have fallen. This money first is a disease! The most important thing for a company is its product. The second most important thing is to take care of your workers. Shareholders will be rewarded if the firm follows this creed. There is another type of character. It is for those who hold position.

Leadership Character

There are many examples. I will provide two. One for each side of a coin. The best example of character under pressure while commanding the big chair is John F. Kennedy in the Cuban Missile Crisis in 1962. Russia secretly began building missiles sites in Cuba which is only 90 miles from the US. Spy planes took pictures. The fear was high that some idiot warmonger would start WWIII. The military advised Kennedy to bomb the sites and attack the island. We got idiot warmongers too. The military put pressure on Kennedy to act, especially with their pupits in the media. JFK kept his cool. He came up with his own plan to use the navy to stop any shipping to the island. He sealed off the island. If they fired on us, they will be responsible for the carnage. Russia backed down. Kennedy kept peace, but angered the Deep State. They would do anything to see that he was not reelected in 1964. RIP, brother.

The other side is shown by the leaders in baseball today. They are not leaders, just businessmen concerned with the all mighty dollar. Their recent decision bowed to pressure. They committed the second travesty. The first one was the discrimination of black baseball players. Now, they compounded that sin with this one. They merged all the Negro League stats with the major league records under pressure from black leaders. Some of these egotistical leaders are unconscionable, unbelievable and unbearable. They are pushing lies and myth. This is a sin against the heritage of the league. 

I will explain. The most important player in baseball is the pitcher. You can win a championship with pitching. Pitching beats hitting all the time. Now, this is reality. Almost every team only has one good starter. The talent drop-off from him to the next in rotation is huge. It drops further after that. You would be a genius if you can remember the names deep in rotation. Now, the old Negro League did not have the luxury of a minor league where pitchers and players can develop. If those teams had one good pitcher and that is even questionable, the drop-off after that star would be very deep. This is how the black stars fattened their stats against second rate players. The whole Negro League would only be equal to Double AA in terms of competition, at best. They definitely had great players like Josh Gibson just like the present day black college football divisions, but the quality and depth is not there. This is a sad day for baseball. Babe Ruth is by far the greatest player in the game.  Where's your character?  Peace.

Odds and Ends: May 2024

 - April's showers brings May's flowers.

- Old Saying

Nice observation, but the world cannot spend a moment to smell the roses. In the Middle East the smell is rot, decay and death. Along the Ukraine border, the air is pungent with blood, burning metal and death. Tornadoes rip apart homes in the central US. Floods drown everything in its path on Pacific Islands and Asia. Drought causes pain, worry and death in India and Africa. Sorry for that. 

There is hope because God gave us compassion and intellect. However, we fail to use these blessings. It is reflected in Churchill's observation on the US, "America will do the right thing, after they tried everything else." With that said, we see glimmers of it in this transition month into summer. 

Electrification

The process to end the high pollution of the gas combustion engine is still a work in progress. However, individuals and companies are moving onto planes, helicopters and self-driving taxi's that will help with climate and environment. It gets better. Boston Metal is a private firm that has developed a way of producing steel by electrification. They will go into operation in 2026. A steel firm in Brazil is already using their technique. How about ocean tankers? Yes! The first one is floating on the sea as you read this piece. We thought about this cargo carrier. We know water shorts out electricity. Maybe this vessel should have a sailing mask as a fuel back-up? I read that some cargo ships are already employing this idea to cut fuel costs. 

Hydrogen Jets?

Another private start-up says that they will produce the clean energy aircraft by 2030. Wow! Of course, I hope that these people understand that hydrogen fuel production is very low?

Solidion

The firm says it has developed a solid-state battery that will provide a charge to go over 900 miles. Mileage is one of the biggest factors holding down EV sales. Currently, the longest range is about 410 miles. In a similar role, SAIC, a Chinese firm says it too has a solid-state battery that it will produce by 2026. 

Super Micro Computer

The firm's stock (SMCI) is to expensive for us, but we like it. They have developed a new cooling system for AI servers that is cheaper to utilize.

Even in the deteriorating commercial real estate market, we find a ray of hope. Pinnacle Bank of Texas just bought a 40-story commercial building at auction for $12.3 million. This edifice was recently appraised at $104 million. This falls under the theory by Joseph Schumpeter with his view of economic progression. An old idea is destroyed by a new, better approach. The "Creative Destruction" leads to innovation. Here's hoping this bank transitions this building into something good for Texas and America?

These things are happening while the present news is bad. Maybe if we all treat each other better like the hippies in 1967 that fostered the "Summer of Love," we can make tomorrow a better place to live. We can use John and Yoko's chanting song, "All we are saying, is give peace a chance."    Peace.