Big Downer Friday: So Much for Our “Options Rally”

We got our predicted Options Rally Thursday.  So this morning, standby for a thorough ass-kicking that may send the market down 300 –or more – points before the week is out.

We have a few government figures (in a sec) but the main concept to be noodling on here is a familiar one for our Peoplenomics.com subscribers: 

Consumer Super-Saturation.

Economic bubbles don’t appear overnight.  A big one takes years to grow.

They are large, oafish, easy-to-spot, although most often they are  hidden-in-plain-sight.

Super-saturation has been in view since about 1975-1980, when some architects I had interviewed up in Seattle told me of the huge boom to come in building and renting Storage Units.

What do people put in these ridiculous boxes?  Well, things they have too much of.  Hoarding is epidemic!

Why someone would buy too much, and then instead of scrapping or selling-off excess, choose to instead rent expensive square footage is totally beyond me.

But it’s a symptom of a society that is totally overwhelmed with its materialist side and not thinking clearly.

That’s when we began to move toward super-saturation.

Here lately, a sign of the super-saturation correcting has become available for all to see as well; but few except for Urbansurvival/Peoplenomics readers can see through the fluoridated fog of modern overloaded life:

One symptom is the huge increase in “abandoned storage unit” auctions.  This is now on televisions and if you follow a few collectible markets on eBay, you’ll see such “auctioned property” now hitting the auctions.  How much more in-the-face does it get?

Another indication is the chart at the top of this page:  The home ownership rate is coming down, down, down.  In 2004, about 69% of US persons lived in owned homes.  As of 2014, that was down to 63.5 percent, and I reckon it hasn’t picked up much.

While it is true that homes have been selling well in San Francisco, Seattle, and a few other tech-heavy hotspots, there are puss pockets on the horizon, like suburban Houston, for one.  There, the oil collapse is a killer. Under $30 in Europe now and likely West Texas will follow.

I figure the Aramco IPO is to fund a Saudi flip out of high water-cut reserve to spin up cash to buy more American properties…but that’s just me.

Let’s get back to Housing:  Use an imaginary number for households in the US:  I could pull 123.2 million out of the air.  That means the number of owner-occupied homes might be down (from 2004) as much as 5.54-million.  The homes are still there – as rentals.

What is going on with these households?  Why rent?  We have some notes in this morning’s Coping section, but it’s really a complicated stew.

1.  People are downsizing.  Retirement plans are blowing up.

2.  Young people can’t afford a home AND having student loan payments.

3.  People are virtual-living – Second Life, Candy Crush, apps, you name it.

4.  Public transit is growing as people cut spending on cars, discover Lyft and Uber, and just can’t afford anything else.  We are 45-days from 2015 data, but in 2014 the American Public Transit Association reported:

On March 10, 2014 the American Public Transportation Association (APTA) reported that public transportation use in the United States in 2013 rose to 10.7 billion trips – the highest number in 57 years.  APTA and its predecessor organizations have collected ridership information since 1917. The highest U.S. public transit ridership number in history was 23.5 billion trips in 1946, a decade when many Americans did not own a car.  The ownership of cars en masse came later and led to suburbs designed for car use and subsequent sprawl.

5.  Child-less relationships are all the vogue now.  Thanks to the LBGT-QRSTU… movement, sex doesn’t mean kids.  For straights?  Birth control works because who can afford health insurance, time off, and besides, what kind of FU’ed world are we bringing kids into?

6.  And so government opens the floodgates to people who will come and a) not assimilate and b) who will bring the fine South American traditions of corruption with them…But they will provide jobs for counselors and welfare state agencies.  We’re getting addicted to bad growth and look what it has done to Eurabia, formerly Europe.

7.  So in the face of all this, the Fed is doing a rate-hike charade.  Sure, that might push up a few things to fight deflation, but we already know people who have scrapped home buying plans because rates are going up.

The market knows better.  The 10-year traded around 2.00% yesterday.

That rate is actually LOWER than before the “hike” – so another one is coming in Jan or Feb…

Economics through a fun-house mirror, ain’t it?

Oil’s Collapsing, Too

Meantime, as we eye a Dow likely to drop 300 at some point today, we see the price of oil in Europe is under $30-bucks and there are some people who are forecasting a decline to the $20 range.

For now, at least when I looked, West Texas was floating a few cents above the $30-mark, but I’m not holding my breath.

People who are sufficiently “Virtual-Lived” don’t need to go anywhere but to a keyboard.  Sims and Skype (and Tinder if you need a quick hookup) will take it from there.

Fun, huh?

With luck, we will wash out next week, but a hard down close today would likely signal continued selling Monday and that puts the earliest chance of a rally about mid-day Tuesday, but even that’s just a dart.

1740 on the S&P might be below our ideal trend channel work (more in Peoplenomics tomorrow) but if that goes – and badly, then other wave counts fall into place from the 2000 rally through present.

That’s beyond the scope of breakfast conversation, but it needs to be considered.

Fresh Data:  Auto Stimulus Dying

So much for the candlelight and mood-setting.  We have two fresh data released that will bear on the market.

First one is retail sales.  As you read this, remember, we have been asking for months “When will the auto sector fail and stop holding up the rest of the economy?”  Here ‘s your current answer:

“The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $448.1 billion,  a decrease of 0.1 percent (±0.5%)*  from the previous month, and 2.2 percent (±0.7%) above December 2014. 

Total sales for the 12 months of 2015 were up 2.1 percent (±0.4%) from 2014.  Total sales for the October 2015 through December 2015 period were up 1.8 percent (±0.5%) from the same period a year ago.  The October 2015 to November 2015 percent change was revised from up 0.2 percent (±0.5%)* to up 0.4 percent (±0.2%).  

Retail trade sales were down 0.2 percent (±0.5%)* from November 2015, but up 1.6 percent (±0.5%) from last year. Sporting goods, hobby, book and music stores were up 7.6% (±2.1%) from December 2014 and nonstore retailers were up 7.1 percent (±1.2%) from last year.

Our second statistical glitch is the Producer Prices, Final Demand number.

“The Producer Price Index for final demand decreased 0.2 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today.

Final demand prices increased 0.3 percent in November and fell 0.4 percent in October. On an unadjusted basis, the final demand index fell 1.0 percent in 2015, after rising 0.9 percent in 2014. (See table A.)

In December, the decrease in the final demand index can be traced to a 0.7-percent decline in prices for final demand goods. In contrast, the index for final demand services moved up 0.1 percent. Within intermediate demand, the index for processed goods fell 1.0 percent, prices for unprocessed goods dropped 3.0 percent, and the index for services rose 0.2 percent. (See tables B and C.)

Final Demand Final demand goods: The index for final demand goods moved down 0.7 percent in December, the sixth consecutive decrease. Over three-quarters of the December decline can be traced to prices for final demand energy, which fell 3.4 percent. The index for final demand foods decreased 1.3 percent. Conversely, prices for final demand goods less foods and energy inched up 0.1 percent.

Dow futures are down about 300- and who can blame ‘em?  Say goodbye to our options rally and buckle up for the bottom to the long-term trend channel.

All of which would not be contributing to the flat-lining of markets, except that we also have the National Stoopid People’s Party (Obama wing of the GOP) is at it again…yes, I’m talking about…

Imploding Republicans

Just when you thought the GOP couldn’t get dumber than abusing and failing to close ranks and support the one guy who actually has popular support  to beat Clinton (Donald Trump), along comes another burst of irrelevant from the beltway-bandit hostages, addicted to the power trip of succumbing to being the “Obama wing of the GOP.”

Here, for example is an account of one RNC committee dweeb denouncing support of Trump.

And we see Lindsey Graham trying to saddle up the Beltway Pony by supporting Yet Another Bush.  Forget that between then, they couldn’t rank as high as Rubio, let alone Cruz and certainly not The Donald.

I’m forced to reluctantly conclude that the reason the Obama wing of the GOP is not sure about Common Core is they might have learned math.

Facts of mathematics aside (1 Jeb +1 Graham = maybe if they’re lucky 1 vote), here comes another thrust from the Stoopid People/Obama Wing of the GOP: Lindsey Graham to endorse Jeb Bush for president.

Trump is paying it all no mind, preferring to hand out free tickets to the Benghazi disaster flick starring the yet-to-be-indicted Yet Another Clinton.

If you are confounded, as I am, by the stupidity of this crap, take a number. If you believed that the purpose of the convention was to find the one candidate who could run Hil out of town, that’s not the agenda this year.

This is really a fight about preserving the revenue streams of the Washington Law Firms that run the Armies of Lobbyists. 

And if that means a brokered convention and lots of back room checks, then conservative/right-minded public be damned.  The Same Old Shit must be defended.

Until we get to “new broom to sweep clean” the market is going to be stuck on depressed – a Depression that may not lift until we are sure the GOP proves that it shouldn’t be immediately institutionalized (en masse) suffering from delusions of grandeur.

While we should already be in optimism and hope around a clear choice.  The Obama Wing of the GOP is totally screwing the pooch – again.