Make or Break Time for Depression II: Second Fed Raise?

imageOur weekly chart reading, not to be confused with fortune-telling, on our subscriber side (www.peoplenomics.com) holds open the idea that as the week dawns, we are really in “make or break” time for not only the Global markets, but for the U.S. as well.

Friday, thanks to a couple of good rallies on Thursday and Friday, we were left sitting exactly on the bottom of a long-term trend channel which spans from 2009’s low through present day.

The fact that at first glance the Dow futures were down around 50 points is hardly conclusive evidence of what’s ahead for the week; stocks have moved that much in an hour (or less) recently.

It’s in situations like this (with the import/export data as presented on the subscriber side) and with Housing figures due out tomorrow morning, we expect that the bottom is in.  Should any of our offspring call to wonder if it’s time to get back into stocks, we would only send them the trend channel chart which has a look of “completeness” to it if this is the fourth move since 2009.

The other big deal this week (as if housing data is not enough) is the Federal Reserve begins two days of meetings tomorrow.  Although it is not getting too much press yet, in our long wave economics studies, there’s about an even-money bet that the Fed will raise again.

Not to sound like the Proverbial broken record, but in our parallels to the 1921-1929 market run-up, we estimate our position on the present timeline as somewhat analogous to the week of 10/27/1927 at the earliest, although it is more likely the week of 7/12/1928.

Admittedly, this is a fairly long stretch of history, encompassing a 9.5 month window, but equating the fiscal policies of one era with another is never exactly precise for numerous reasons.  Not the least of which is that what was used as “money” through the 1920’s orgasmic peak was still being marked to something of underlying value:  Gold and Silver.

The fiat (paper) money of the day was largely Silver Certificates which featured a promise of convertibility at any Federal Reserve Bank.  The Wikipedia entry on the Silver Certificate gives us some other interesting background:

Silver certificates are a type of representative money issued between 1878 and 1964 in the United States as part of its circulation of paper currency.[1] They were produced in response to silver agitation by citizens who were angered by the Fourth Coinage Act, which had effectively placed the United States on a gold standard.[2] The certificates were initially redeemable for their face value of silver dollar coins and later (for one year – 24 June 1967 to 24 June 1968) in raw silver bullion.[1] Since 1968 they have been redeemable only in Federal Reserve Notes and are thus obsolete, but still valid legal tender and thus are still an accepted form of currency.[1]

Large-size silver certificates (1878 to 1923)[nb 1] were issued initially in denominations from $10 to $1,000 (in 1878 and 1880)[4][5] and in 1886 the $1, $2, and $5 were authorized.[5][6] In 1928, all United States bank notes were re-designed and the size reduced.[7] The small-size silver certificate (1928–1964) was only issued in denominations of $1, $5, and $10.[8] The complete type set below is part of the National Numismatic Collection at the Smithsonian’s National Museum of American History

While we don’t expect the physical size of the U.S. Dollar to change, there is, nevertheless, a major campaign against paper as government ramps up its attacks on holding cash.  The outsized mania to enforce total “accountability” on the transactions of citizens is nothing short of economic slavery combined with warrantless search, but the public’s attitude toward what “money” is has gone completely off the rails.

As evidence consider this:  In the UK recently, following the death of David Bowie, some 38,760 Brits signed a petition to put David Bowie’s face on as unit of Kneeler currency.

From the exchange of nominal paper for a measurement of long-term precious metals to a simple pledge of value from a government which buried a ton of tax hikes in the Affordable Care Act to a suggestion in England that a note which we’d call a Bowie…it all serves to demonstrate the drift encountered when trying to make sense of one Economic Age versus another.

To be sure, while this looks like the week of June 28, 1928, the pre-Depression Fed raised rates in February, April, and July. 

Since the Fed raised in December just past, the greatest chance would be that they will not raise at this meeting, but will wait until the subsequent one to raise again.  Still, in terms of the “being on our schedule” another rate hike this week is not out of the question.  The current Fed is running a tad behind the ‘28 Fed.

The first hike (in December) began to have its expected effects, as explained for subscribers.  If you’re not one, you can click over here for the Fed H.8 report and see where the money has already started to move.

I would be blowing my own horn if I sent an email to my local serious bond trader-friend Don and reminded him that this is the first part of “Where will the money come from to blow the top off the Dow to an explosive Fifth wave finish?”

These things take a while to wind through the bowels of money-changing.

That noted, when you see that banks were running from the theatre after the last Fed hike, screaming that they were giving up on cash, trading assets, and interbank loans….well, the money has to go somewhere.  And that somewhere is likely to be the stock market which is why I put it “out there” in a recent radio interview that we would likely see new all-time highs before Summer.

Seriously:  Where else is there to put money?

Oil?  Who wants to play “catch falling knives” although big players like the Saudis will likely use the period of weakness to roll-forward from some of their domestic assets into those of other countries, like the U.S.

Real Estate?  Watch the home prices tomorrow morning when they come out.  Although some markets are hot (SF, Seattle) others are not and the angle of the dangle begins to wangle.  Childless coupling means smaller homes work.  The Ure progeny are zero-for-three passing the mid-30’s…

Which also reminds us that the macro-trend to micro-homes and an all computerized life is driving, too.  Who needs a computer room, or a library, or a den when you have a tablet with Win-10 and all spreadsheets synched, a zillion eBooks, and Tinder?

Put your life savings in Bonds?  You mean here at the end-stage of a decline in the long-term yields that has been underway since 1981?  You’d have to be mad.

Recreational Property?  Who has time off to re-create?  There are 7-billion people in the world, the idjits in DC keep bringing in more who will work cheaper you will and so anyone who can take real time off for recreation property is either disabled, retired, or works for themselves…

Gold and Silver?  In time these will pay off – and possibly BIG, but they have risk, too.  In a world where people equate blockchains and Bowie with symbolic wealth, what happens to the long-term assets?  We would not be surprised by summer to see gold down under $1,000 and silver perhaps in the $10-$12 range. 

While all this is going on, we will likely see few other real opportunities, and cash in banks is only protected from bail-ins to perhaps the FDIC insurance levels, but something is better than nothing.  So the Fed offering higher interest rates, well, it does make sense.

Crypto currencies are another possible deployment, but here, we’re only one super-clever programmer away from disaster.  Still, from the morning check at One BTC =$399.10 paper, there is a way to look at the BTC charts to where in Wave 5 blowing up to new highs, the old highs of BTCs could be exceeded handily.

Staying at home due to weather this weekend has not resulted in any particular mass clearing of the national state of mind, judging by markets so far today.

I’d put odds on slowing (or at least leveling) of Housing tomorrow at 50%.  If housing is not zooming up, stocks will look better.

And while the Fed is only perhaps 30% ready to raise rates again Wednesday, again that will press people to reconsider stocks because they are far more liquid than other long-term inflation hedges, the beat bonds *(unless you play the short side) and young people can afford a few thousand in stocks, but a few thousand in Housing might not even get a call-back.

To put the week in golf terms:  We’re on the Tee, there’s a possible dog-leg on Wednesday, but higher than last week seems a decent bet, if oil can stay out of the rough.  Wed hope to be in the greens by Friday.

In Case You Missed It

Yes, we’re in the 12th re-write of Snowmageddon, and just ahead is The Sequel:  The Snowmageddon Commute Back to Work.

We were busy for 3-minutes Sunday here at the ranch (60-degrees and sunny) remembering and appreciating that while we don’t live in the epicenter of hype, getting to and froe isn’t that tough around here.

Where is Boeing?

What ask?  Well, with the Iran sanctions off, Airbus is flying in the sales teams.

Boeing, as everyone in Seattle knows, relies heavily on the Export-Import Bank of the United States.  And, despite talk of it being disbanded, it’s still around as described in Wikipedia:

The bank was established in 1934 by an executive order, and made an independent agency in the Executive Branch by Congress in 1945. It was last chartered for a three-year term in 2012 and extended in September 2014 through June 30, 2015.[3][4] Congressional authorization for the bank lapsed as of July 1, 2015. As a result, the bank could not engage in new business, but it continued to manage its existing loan portfolio.[5] Five months later, following the successful employment of the rarely used discharge petition procedure in the House of Representatives, the U.S. Congress reauthorized the bank until September 2019, through a measure included in a major transportation funding bill, which was signed into law on December 4, 2015 by President Barack Obama 

Yes, at some point, I expect Boeing will try to get into the Iran sales ballgame.  But it will be a tough sell.  The Mullahs in Tehran will be looking at the Boeing AWACS, F-15,. and SmartBomb contracts with the Saudis and might be expected not to be really quick to return phone calls….

War, even proxy and low intensity conflicts, always carry some price in forward commerce.

Primary Madness:  Is It Over Yet?

One week from tomorrow we will load up on Iowa Caucus stories

In the meantime, we continue to wonder about the future of FBI Director James Comey.  Will he quit over the inability of the FBI to move the ball prior to caucus time in Iowa?

A bit of background here on how the mechanics of the email scandal may be found here:  .What can the FBI do about Hillary Clinton without a grand jury?

The simple answer is: Nothing.  The further along the road to the White House Clinton slithers, the more Teflon she gathers.

Not much of a choice, really.  Only in America, huh?

Flight Time/Logbook

My first landing Saturday was a little bumpy in the old Beechcrate down at KPSN.  But nothing compared to Turbulence: 7 hurt, American 767 diverts to Newfoundland

What’s the old saying, though?  “Any landing you can walk away from is a good one…

Another useful old saying:  Monday means we’re a day closer to Friday.

Comments

Make or Break Time for Depression II: Second Fed Raise? — 13 Comments

  1. Atlas, you are on your own for a while.

    Whats a halo? “the perfect circle of sound.”

    It’s no wonder anymore, why this world operates in cyclical fashion. Fashion = being attire for attitude as it relates to being present, able in social situations..

    Much to consider in those multifaceted puns. ;) i dont want to rule the world, i just dont want to be ruled by the word of the world.

  2. I look for a surprise in the housing market. Insiders are reporting that household formations are on the upside for the first time since 2012. Ivy Zelman reports on CNBC that housing starts, (I think she means over the whole of 2015) are up 50% and inventories are at a 30 year low. The expected housing starts report out, I believe this week, will probably report down, but that I think will be seasonal. As the Fed tightens, more would be buyers are going to want to get in before Mortgage rates start to rise. REITS haven’t participated in a meaningful way to the downside in this weak market.

    It fits, in my estimation, that we’ll start to see the beginning of a new housing bubble this spring. Housing is the last thing to recover and its a good predictor of a market top before the next recession in 2017/2018. So, as the housing market heats up, assuming the pundits are correct, and the Market starts its last leg up after this crappy presidential election. JMHO.
    Cheers

  3. The chickens and the farmer…
    there once was a farmer that had a flock chickens..every morning he would go to the pen and spread the cracked grain..the chickens being happy and well fed would lay lots of eggs that the farmer would take to market where hE made a reasonable profit..some he would let hatch and he had a vet to keep the all healthy..
    one day the farmer realized hey the chickens weren’t eating all the feed he was putting down and other birds were landing and eating the grain…hmm he thought to himself..if I fed them less and out that grain in the bank I would increase my profitts.
    so he started to do just that..the chickens continued to produce the same amount of eggs but they started to become more agressive fighting for what little bit of grain there was..
    this went on for a long period of time and gradually the health of the flock began to become sickly and die off..
    egg production began to reduce the farmer didn’t know what to do..the vet didn’t understand how a once vibrant healthy flock went down so quickly.
    the cost to replenish the flock so the farmer started to buy his eggs from somewhere else..the farm gradually started to go in disrepair and needed a lot of money to get it back in working order..the farmer didn’t want to hear that and refused to fix the farm up always saying…if it wasn’t for those darn chickens…it’s their fault that this is happening to my farm…
    the moral to the story..when building a tower of blocks to stand on..you had better make sure your base is a strong one..sometimes it’s better to make a smaller reasonable profit keep the chickens healthy and happy than to make it all at once..

  4. just how do you support corruption (payoffs usually to politicians eg. sheldon silver ) with a cashless system ? Wait— let me think…!

  5. “””While we don’t expect the physical size of the U.S. Dollar to change”””

    In the news.. there was a lot of discussion on Sweden moving to become a cashless society..
    we all know that money is made up in the minds of others giving it the worth it is.. and people sit at home anxiously awaiting a piece of paper to see how the number has adjusted on it.. now if it all became computerized.. it wouldn’t make any difference they can raise numbers or lower numbers at will people would still have the same illusion of wealth.. ( coinage was originally a form of you traded working metals for goods that eventually got perverted into the ponzi scheme of money today)if we went totally digital there doesn’t’ even have to be a piece of paper..I don’t like that idea since when it all crashes and tp goes through the roof what would you have to wipe with.. but then hey I’m just being my pessimistic self.. the other thing is. could going cashless stop us from the upcoming crash of crashes. http://www.cbsnews.com/news/sweden-moving-towards-cashless-economy/

    • I like this excerpt from that story: “But there are pockets of resistance. Hanna Celik, whose family owns a newspaper kiosk in a Stockholm shopping mall, says the digital economy is all about banks seeking bigger earnings. Celik says he gets charged about 5 Swedish kronor ($0.80) for every credit card transaction, and a law passed by the Swedish Parliament prevents him from passing on that charge to consumers. “That stinks,” he says. “For them (the banks), this is a very good way to earn a lot of money, that’s what it’s all about. They make huge profits.” ”

      More bucks for the banksters. And of course, it means real time tracking of consumer habits for the Government and its various branches like the Medical profession. So, you drink to much adult beverages, your doctor will immediately be able to access your purchase record, brand you a drunk and alert the Government goons to collect your firearms. What could possibly go wrong?

    • There are only two people in the world qualified to do economic forecasting and THEY don’t agree…