Two Depressions to track: One is a Tropical Depression that will be headed up into Texas next week. And we worry about what looms for 2021 in personal finance. We’ll begin with this latter (depressing topic) first.
Somewhere in the Peoplenomics subscriber Master Index page there is a nifty tool I developed a few years back. Subscribers can download and tinker with it. Essentially, if you enter two data points you think define the first move of a newly emerging Elliott Wave count. Then the spreadsheet projects certain probabilities. Going up, or down with target levels.
One drawback to Elliott, here lately, is it has a terrible time with short-term MASSIVE injections of money. So me researchers claim that the expectation of additional money (inflation) is already “baked in the cake.”
In my view, it is not. Not at uber-extremes, anyway.
You can, for example, see a large part of the economic “Trump Bump” in the economy when the onshoring tax rules went into effect a couple of years back.
We’re thinking that when expectations change, trading algo assumption tables change, too. And that makes market analysis confusing in non-rational times.
Sloshing the Money!
Tons, gobs, and oodles of it. Take a look at the latest H.6 Money Stocks report out last night after the close:
In other words, since the massive decline in markets (in March) became evident, the amount of M2 has screamed up 38.2% annualized.
In my work, confessing to be something of a monetarist: Money Supply Matters. And when we back-out the money supply change, we have not-yet really come back to February’s (somewhat more honest) nominal all-time highs:
In short, while the jam-up in money stocks makes it LOOK like good times are on a roll now, when you back out frantic back-room printing and mortgage panic-buying at the Fed, we can make out a pretty-normal 80% retracement from the March lows of this year. If you back out the money slop.
Not saying this is “bad” per se. I mean, with due respect, the Fed has pulled off the biggest “wool-over-eyes” in history. They have taken the beginnings of a Real Collapse and papered it over such that average people believe the economy is doing OK. Will they be right in the longer-term, though?
We label this as an element of “down-conditioning.” As laid out in Wednesday’s Peoplenomics report. Because even though markets are up, your specific lifestyle is likely in decline. Higher prices, fewer jobs, more limited consumer choice.
To the Feds credit (and bankers do love to be creditors!) they have pushed the recognition of a pending Greater Depression out to what is (as of this morning) about the equivalent to March 15, 1930. (A round of applause is in order, while recognizing that not only the actors but the audience too is certifiably insane, right?)
Why a Crash Window Opens
Tisk, tisk. Surely you can see the Elliott of this, right?
I want you to meet two pals of mine. I.D. – blue arrows signifying “initial decline” (nominally an Elliott Wave 1 or A down). G.D. (the red arrows) are the “general (or greater) decline” which often (but not always) shows up after the I.D. wave 2 (or B) wave is done.
If 2 or B is done (as a pop higher to the Europe close might be an interesting place to consider shorting from if we rally this morning, and if you like playing with nuclear fuel rods (short positions), then the right-hand down arrow MAY become useful next week. OR NOT. This is NOT TRADING ADVICE.
Early futures this morning were sitting on the 50-day moving average of our Aggregate index, so we shall keep our eyes open over the next couple of weeks.
Jiggering the Money
One other item because we go reading up on U.S. budget issues: We couldn’t help but notice that M1 declined in the latest confessional.
Since we cannot be certain which one of these really drives under current conditions (M1 or M2), we can only generalize that M1 was down 6.65% in the Thursday Fed report while M2 was only up 3/4th’s of one percent. So we (blithely or stupidly) think of this as the Fed taking a few “lines” (of credit crack) off the coffee table.
Which sort of rolls naturally into this morning’s current account report.
The U.S. current account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, widened by $59.0 billion, or 52.9 percent, to $170.5 billion in the second quarter of 2020, according to statistics from the U.S. Bureau of Economic Analysis (BEA). The revised first quarter deficit was $111.5 billion.
The second quarter deficit was 3.5 percent of current dollar gross domestic product, up from 2.1 percent in the first quarter.
The $59.0 billion widening of the current account deficit in the second quarter mostly reflected an expanded deficit on goods and reduced surpluses on primary income and on services.
How did that hit song go?
“Mighty as well face it, you’re addicted to stuff.”
(Gimme a hoo-rah for Robert Palmer!)
Tropical Depression 22
Out in the Gulf of Mexico, we are watching the just-upgraded Depression which may head up our way (we’re about in the “x-box”, lol):
Already, forecasts for our slice of Texas into next week are showing 2-inches of rain. Which, while nothing exceptional, is still a drought compared with Alabama or the underwater panhandle.
Let’s Visit Stupid!
Censorship? Commerce Department Reportedly Planning To Shut Down TikTok, WeChat In The US. Wait! Are we being set up to be firewalled? (Remember who has been forecasting internet content creation licensing since 2012…ahem…)
Yes, Brits are a bit slow: Harvey Weinstein: Jailed movie producer stripped of honorary CBE. Took them how long?
By the Way!
I did put up how CV-19 is now in an Elliott Wave 5 in the Peoplenomics report Wednesday. Here’s how it’s looking today:
Seems to follow all the “rules” observed by the great R.N. Elliott: 1 is smaller than 5, 3 was the largest wave so far… I mean, this stuff is really graceful. And simple enough for dopes like me to see and figure….
Smart People Notes
We were actually pleased to see how a Federal judge blocks Postal Service changes that slowed mail. This may reduce some of the complaints about mail-in ballots. In science, it’d be like taking a variable out of research.
Are financial engineers planning to “take the money and run? Wall Street Bankers Push For Bonuses Ahead of Possible Biden Win.
And we’re not sure where to slot this report: Scientists win award for giving an alligator helium and making it shout. But did it fly?
Off to watch markets now.
High trading volume expected as it’s quadruple witching today. But, it’s not today we’re worried about so much as what happens next week. That is when things could get interesting.
Oh – and Ure welcome – no carrot-top or “Slow” stories this morning. 46-days of hype and BS that won’t change anything, anyway…so why bother?
After the Current Account data, futures went positive. We’ll see how long that hangs together…side bets on Monday?
Write when you get rich,