News

Not a column for the kiddies this morning…

Barring the Syria-Turkey (U.S. – Russia proxy) mess escalating into a “flash dance” – we have some reason to hope on this Christmas Day 2015, that we will have at least one more pleasant holiday ahead of us next year.

If you follow chief word-tracker Grady’s adventures, you’ll appreciate that there are two words that have been giving us fits lately at our www.nostracodeus.com project.

One is the word “flash” so we will be watching to see what evolves with this one.  A “normal” track back into Google and Bing is less than satisfying.  Sure, we have The Flash season II and we have plenty of flash flood cancellations as part and parcel of the weather being exceptionally warm this winter due to El Whats-It.

But I’m thinking the word will meet up with rising prominence in stories like the big explosion  in Nigeria where about than 100 were killed overnight.  Toss in multiple human suiciders and maybe that’s what the language shift is hinting at there.

The other word to watch is Methane.  It may be related to the evolving environmental disaster at Aliso Canyon out in California.  There, an underground gas leak is causing more environmental damage than dozens of volcanoes.  And there seems to be no way to shut if off.

While Porters Ranch residents “lawyer up” the imagery of this slow-motion disaster is impressive, indeed.

Still, our main focus is captured at the macro level by three defining events which continue to unfold.

One is the election.  As mentioned yesterday, when the Obama administration announces a “sweep” to pick up illegals – and they do so a month in advance (which gives everyone time to hide) we can’t help but sense it is all a set-up.  That’s being echoes by others this morning including the Western Journalism site.

The second and real story to track over there is how Paul Ryan (who we’ve name the head of the Obama wing of the GOP) is defending the horrible budget just passed by the Fools on  the Hill.

While Ryan, et al, talk about how we “need” H2B visas, the reality is that we’re bringing in a new underclass from overseas.

What’s more, while Ryan and the Republicrats screw-the-pooch on the budget, they make senseless yammerings about a future balanced budget is in the works.

What Ryan assumes is that you and I are idiots.  He may be right about me, but you’re maybe aware enough to figure that NO CURRENT CONGRESS CAN BIND A FUTURE CONGRESS. 

Anyone with a nickel’s worth of brains sees proof of this in the how the Social Security and Highway “trust” funds have been broken like piggybanks and how we should have had a balanced budget many times over.  And let’s throw in the piecemeal destruction of Dodd-Frank, too, while we’re at it.

The paymasters (many of which are big District of Corruption law firms) and the Legions of Lobbyists pretend there is not a moral and ethical ideological meltdown underway in America.

But to my third point, let me run this one by you as two obviously contradicting headlines:

The first (and remember who got a piece of your tax money in the budget) is this gem:

“Hiding HIV From Partners Is A ‘Human Right’, says Planned Parenthood.”

Oh?  So being a broken condom away from a slow death, shouldn’t be a choice? 

Meantime, the NY Times reports “Man With H.I.V. Gets Prison Time, Again, for Unprotected Sex.”

What we have here looks suspiciously like America is “making up industries” by holding to conflicting, nonsensical policies that serve to create more problem than they solve, except they do result in additional economic activity.

I mean seriously, think about it:

On the one hand if HIV positive is a secret, then we expect more headlines like the fellow going to prison.  That one case alone employed three lawyers (the two sides and a judge) not to mention the custody costs for however long.

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Time to “shoot the reindeer” down on Wall Street.

Metaphorically speaking of course; don’t want our peace and quiet in the Outback ruined by a pack of animal rights activists.  Otherwise, I’ll send them up to talk to the coral snake family.

Point is (local flora and fauna aside) that our long-awaited Santa Claus rally this year has done a marvelous job of cheering up traders by tacking on an additional 185-points Wednesday.

Today?  Well, the market looks softer than a geezer who’s lost his Viagra prescription.  We might get a rise of out things, but will it lead to much?  Likely not.

For one thing, the markets will close at 1 PM eastern, while the bonds will close at 2 PM.  No doubt to avoid a logjam on the Long Island Expressway.

For us mere mortals, we notice the 10-year bonds are right about where they were prior to the “rate hike” – which as we’ve explained is really just an ease to please.

U.S. Department of Window Dressing

We can help but be a bit suspicious when the democrats start working the border invasion issue, just in time for what’s her name to claim spurious data in the wo9ol-pulling contest (which some call a presidential election).

This story in the WaPo makes it sound like it’s going to be a big deal. A planned Federal “sweep” of illegals is coming.

While there will no doubt be some arrests (the window-dressing) we are collectively appalled that while this is going on, thousands of Syrians are jumping ahead of lawful immigration applications because of the cynical Obamanistas and their Bolshevikian plans to bring in as many people who hate us (or will become good little democrats) before the election.

Then, expect another flood.

Syria, Amnesty, and Calling Out St.

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Ah, the Christmas spirit.

Elaine and I finally got around to putting the railings up on front deck #1 Wednesday.  It’s a feat made possible by the amazingly nice weather this winter (so far).

No, that is not global warming:  It is El Nino which is at an extreme this year.  Which is fine, and since there seems to be some correlation to the Sun’s 11-year cycle (and don’t get me started on the economic cycle that runs with that) because it means in a few more years, the pattern will flip. 

By then, the sycophants of global warming will use the natural cycle behind their  cause célèbre to proclaim victory. 

You’ll know that time has arrived because you will have been hoodwinked into paying another layer of taxation…but again, not today’s story du jour.

No, instead I thought this morning we could do a little thought exercise about the future as shown by activity verbs.

I’ll show you what I mean:

Let’s go back a hundred years, or for that matter, to the lead-in to World War II.

A glorious time in American history it was; for we were a country which built things.  We constructed marvels of engineering.  Grand Coulee Dam had been built.  Haven’t done anything that big since.  (The Chinese have with Three Gorges which may be a sign of ascendancy in global activity rankings.)

Today, though, we don’t seem to be “constructing” or “building” as much.

In its place has come “coding.”  We also see a lot of “developing.” A few offer “work product” while others create  “intellectual property.”  All as vapor-ware replaces real stuff.

Google Trends is a marvelous tool for spotting trends like these.  For example, when we look at a term like “build,” what we see is that we are just now rolling over at the top of a cycle and we may be heading down over the coming few years:

BUILD:

As you can see in this chart, the past cycle high was around 2004, but the peak in the housing market didn’t come until 2007 – so three years between language/use and  the evolving physical reality appearing. 

Not to harp on our outlook for a grim  mega-depression in 2017, and thereafter until 2021, but if you look with “soft-focus” you can almost see it.

On the other hand, all those computer science grads may have something to do…because there is a long-term recovery in search activity for…

CODING:

Here is another trend – not that the sample is large enough – but it sure as heck is interesting: 

WALKING:

And here is another trend of something “verbly” – this whole “prepping” movement.

Now, to my (admittedly cynical) eyes, this one, like construction, seems to be just past “peaking.”

PREPPING:

Don’t get me wrong: People are still very interested in DOING something, it’s just not as clear WHAT exactly they are interested in doing…at least from among the small number of action words (verbs) we have been sampling this morning.

DOING:

Things may not be all bad.  Lots of Americans doing…which didn’t seem to happen on the GOP’s watch in Washington.

In fact, the good news is that the act of “giving” seems, according to our Search Engine Oracle (www.trends.google.com not to be confused with the other kind of SEO) seems to be telling us that there is a very regular heartbeat in the behavior of humans.

Not only does Christmas (and the period leading into it) show an annual  heartbeat but the difference between the peak and bottom of trend may represent something about what we might describe as a prevail level of generosity… which is what the giving chart showed ….More people DOING good irrespective of season:

GIVING:

It is possible that the crass materialism of the “me generation” has also peaked?

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Mrs. Claus may wish to get hold of Bob the Enzyte guy and have a little confab about Santa’s Low-T.

Except, it’s not the T as in testosterone.  It’s the T as in Treasuries.

You see, my friend the Bond Dude who suggested that the Fed raise was accompanied by a loosening on the back-end to essentially give an illusion of an interest rate hike while in reality they were just doing an easing, may be exactly right.

Here’s why I am leaning this way:

Went you look at interest rates a year ago, do you remember where they were?  (10-year) Around 2.257.  On Monday of this year (yesterday if you’re in the egg-nog recovery ward) the 10-year closed at 2.20.

So let me ask you this: Since the 10-year was up at 2.47% in June of this year, tell me again about how the Fed supposedly “raised?”

The truth of the matter is that steering an economy with interest rates may not be instantaneous.  But when I looked at the latest money supply figures, my Bond Dude’s hypothesis actually looked like it might have some substance in fact.

Here’s a quick scribble on the inflation rate of the monetary supply, so you can see what I’m looking at:  Left Column is M1 seasonally adjusted and the right is M2 seasonally:

If the bean hasn’t kicked-in yet, the story goes like this:  Bottom data first.

Last year the M1 increase 0.554% or an annualized rate of 6.86% Ocober to November period.

Now for the top data:

What it reveals is that M1 (on a seasonally adjusted basis) went up 1.884% in one months and annualized this works out to a bump of 25.197%.  You can see M2 was going up 8.9%

This would certainly explain why the Fed rate increase is not being reflected in 10-year rates yet…and why my friend the Bond Dude is likely right that while the Public Face was raising, the Policy Reality face is still passing out money like crazy.

I have to admit:  It’s a graceful way to try and arb up the economy and it should work.  I am continuing to expect a major rally in Q1 –Q3 of 2016, it’s just that the Fed may not be driving bond money back into the markets.

It may simply be because there has been another defacto easing which is what looks like what happened here.

We will revisit this in a month (when we get the first December data) because last year, the seasonal Christmas bump in M1 annualized to something like 15%. 

And if this hare-brained theory of ours works out, the M1 annualized for December should be in the 30-35% range.  And 30-90 days later, the market will be screaming ahead. New highs, skies parting, and green shoots II will be going strong.

Except it’s a paper game, and few people understand the interplay between money creation, rates, and markets, and maybe you’re not ready for that discussion so we will save it for the grown ups over on the www.peoplenomics.com side of things.

Just remember:  When money printing increases, a month to three later there’s a tendency for markets to rise…more money means it’s easier to go bidding up of prices.

Hot Economic Data

Well, would you believe lukewarm?

Real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased at an annual rate of 2.0 percent in the third quarter of 2015, according to the “third” estimate released by the Bureau of Economic Analysis.

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This is the time of year when going to the mailbox is all kinds of fun.

One reason is weather.  We have transitioned out of the 4-months of hell that hits East Texas on the last day of May each year and then doesn’t leave until the first of October.  During that window, no matter how you walk (slow, fast, clinging to shade, crawling,  or whatever) you’re still going to work up a sweat getting the mail.

But with the temps here in the mid 70’s this week, going to the mailbox is a real joy.

And one of the other reasons is we never know who is going to send us what.

The first pleasant surprise was a book that arrived in the mail…and it sounds like my kind of title:  The Ice Cream Lover’s Diet.  Which you can read more about over at the book’s website which is (coincidentally) www.icecreamloversdiet.com.

The book  – the true life adventure of Katja Gwynn – tells how she managed to lose 70-pounds(!!!) on a diet consisting of ice cream.

But not just any ice cream.  There’s a way to do ice cream which will free you from pounds – and there’s a way not.

Her husband, Stephen,  a regular reader, is helping on the next phase of their project which is setting up the manufacturing of the ice cream mix so people can munch on something fresh and good while they are shedding points.

I wanted to mention it as something to put on the list as a late stocking stuffer, or as a personal workbook for January since eating at home (and saving money by not going out) will likely be on everyone’s agenda in the next few months, if not weeks.

The next envelope came from John, a fellow ham (VE2) who’s in Champlain, NY..thank you.

Then came the “annual Christmas letter” from my life-long pal up in Gig Harbor.  He and the Mrs. may be playing real estate roulette in 2016 and if they do, it will weigh on our decision where to live.

In the meantime, I was honored that they included a picture of my buddy, his son and his son’s wife standing in front of the Beechcrate.  You may recall his son was up at Wichita Falls and we flew from here to thar during his last visit.  The son’s now driving C-17s around the Pacific Rim for Uncle’s Air Force.  Although that means living in Alaska for the kids, it is closer to the North Pole which seems to me would be useful this time of year. 

Panama and his Lady/Intended sent us a card.

And there was a beaut from the Landry’s as well.

Three interest-free credit card offers and a couple of local ad flyers rounded out the mail run.  When you live the monastic life of the Order of Profits, and spend long stretches praying before the Arc of the Spreadsheets, the walk to the mail[box holds all the excitement of a Klondike Gold Strike..

– – – – –

Now the problem comes out: What do WE do about cards in return?

I never seem to do Christmas cards well.  A few times I’ve sent out Christmas in July cards.  These begin with a not:  “Hi (so-and-so) I have not been able to sleep for six-months trying to find a suitable card to return since your magnificent piece of art….”  blah, blah, blah…

I suppose there are a couple of reasons for it…not the least of which was when I was young, my late father would take an annual Christmas picture.  He would develop it in our darkroom – yes, that’s where the 2 1/4X 3 1/4 Speed Graphic came from.

The tradition started when we were living on 16th Ave.

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Modest pop at the open:  The futures were up about 100 points in the US markets earlier.  But things elsewhere around the world were a bit less chipper with persistent discussion of deflation.

Take for example, this UK CityWire report: “Gimme shelter: where multi-managers are running for cover…’  A sample quote – to give you the flavor of things:

‘The market thinks that we are in a healing process and interest rates are in a healing process. Deflation is apparent, downgrades in company profitability are increasing and the financial crisis is far from over.’

The U.S. situation is admittedly better, but that might be because of the Fed’s most recent sleight of hand on rates.

One of our sources in the bond trading world called over the weekend to chat about how even though it looks (on the front steps of the Fed building) like there was an interest rate increase, there was an actual easing out the back door.

Sort of like telling someone who owes you money “I’m going to charge you more interest, but I’m going to slip the additional vig under the table…”

Our bond source is convinced:

“What the Fed REALLY did was ease…but no one is calling them out on it…”

Something about “biting the hand that…”  Oh, well, Honesty is a liability and and Truth is leveraged, anymore.

Beyond Debate

An A.P.

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OK, this is it.

The only thing I am getting for Christmas is a very big hard drive that plugs into one of our routers.  That and 35 minutes worth of UPS power supply for it.

Some freaking Christmas, huh?

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(Back at the Ranch)  It’s the overworked analogy of the three-legged-milk-stool facing investors for the next couple of weeks..

While the Dow futures earlier were down about 50-75, this is a fine time to be working on market-direction judgment skills because we have three macro-trends and a seasonal factor going.

1.  There is a major concern around investment outfits about how “the numbers” will work out for the year.  In high-rolling firms, the bonus can be many times the salary of top decision-makers.

Here’s the problem:  The S&P 500 Index closed 2014 at 2,058.90.  Yesterday, the S&P closed at 2,041.89.  Down for the year.

So in order for the bonus pool to come in good (depending on how the compensation package is worked) a fund manager or sales type would need to turn in a barely positive performance for the year.

From the investor standpoint, the year as mostly sucked.  The return on a portfolio of S&P stocks (not accounting for dividends, bankruptcies, splits, and yada yah) is about nothing.

I won’t rub salt in the wound by mentioning something we kick around on the www.peoplenomic s.com side quite often:  The problem of where to invest when there is no ‘safe haven’ available.

So yes, there can be some hidden incentive to drive the market down in order for some managers to look relatively better than the overall slog.

2.  Tax selling happens every year.  The idea is that if you have a loser in your portfolio, you want to unload it real soon in order for the sale to settle ahead of the annual close. 

Most wise investors who aren’t psychologically married to loser instruments have been unloading since much earlier this year.  But there are enough “I know it’s going to change if I just hang in another few weeks…” types, that there is always something of a rush for the exit door about now.

Casinos are another place you find crowds of people who don’t understand runs in the statistical sense.

3.  Last but least, we have Dynamics.  (Not to be confused with Boston or Microsoft).

A long time back, I mentioned either here (or to Peoplenomics readers) that an idealized close on Dec. 31 this year would be an S&P of 1,983.76 based on my modeling work.

Just so’s you understand how good (or bad) our guesses are, here’s a summary of deviations from predicted S&P” levels on a daily basis from October 2 of this year:

That last line may not make sense, but what it means is that ideally, in my modeling of the world, the S&P would close today around 2,044.63.

The odds of that happening are very low, but the model gives us some ideas where things could/seem likely to go based on the notion that there is something of an historical replay underway that most people completely miss.  Except Peoplenomics.com readers, of course.

There’s more to it than “just history” – there is also the fact that major waves in market sentiment are somewhat self-similar.  In other words, the market closed yesterday 18 points from where it “should” have on a self-similarity basis.  Considering the position of the markets prior to the open, self-similarity between market moves is not a bad way to approach things.

But I digress.

The final point to consider:  If the market closes the year around 1,983.76 l on the S&P, this may be a different kind of approach to market analysis worth further attention.. 

No, I don’t expect it will “hit” exactly.  But to have some confidence (with 50-100 S&P points) on  where the market would end the year isn’t a bad thing.  Especially if that’s been on the drawing board since May when I began tinkering with the concept.

Even if the futures are saying Dow down 100 today, the model says the fat red guy rally ought to show up sometime…but beyond that, a soft downward trend through year-end seems to be the bigger scheme of things as they appear here in the Outback of East Texas.

Ukraine Goes Broke, Neocon’s Lose Their Syria Scam

Yeah – the Western corpgov media don’t seem to be mentioning much of two stories making it big in the Russian press today.

First off, for all their footsie-dancing with the EU, Ukraine is now broke and they will likely become the next Greece of the EU.  A quote from Russia’s Pravda explains:

“Noteworthy, the International Monetary Fund earlier acknowledged that Ukraine’s credit obligations were sovereign, rather than commercial. If Ukraine does not repay its debt to Russia before December 21, international creditors will cease to support the Ukrainian economy.

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(Back at the Ranch)  We are, as of this morning, almost exactly one week from Christmas Day.  And depending on your time zone, it’s about now that the turkey needs to go in.

People make a Very Big Deal about holidays.  And part of the act seems to be presentation of all kinds of checklists.

“Checklist for perfect gravy.”  “Checklist for perfect leftovers.”  “Checklist of 12 barf bag substitutes for this sickening season of commercialism.”

So this morning, in keeping with helping out, a couple of indispensible checklists.

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