A full plate this morning: Some critical outlook data has just been released. The Federal Reserve is about to replay its role as a “failed deity.” And we can make some generalizations about herd behavior at the top of Wave II’s.
We will once again shy away from memes and “virality” in our discussion of The Future. Because while there has been a terrible injustice done in the George Floyd death in Minneapolis, it does not, in our view, justify an outbreak of violence 1,900.7 miles away (by car) in Los Angeles. Unless, of course, there’s an agenda in play. This may be a precursor event to future events discussed in Peoplenomics Wednesday. It would be an “easy fit” or “migration path.”
Five nags in the horserace for investor attention: Fresh unemployment, GDP. Corporate Profits, and Durable Goods. The Fed confessionals will be discussed separately, however.
First Time Unemployment Claims: +2.1 Million
“In the week ending May 23, the advance figure for seasonally adjusted initial claims was 2,123,000, a decrease of 323,000 from the previous week’s revised level. The previous week’s level was revised up by 8,000 from 2,438,000 to 2,446,000. The 4-week moving average was 2,608,000, a decrease of 436,000 from the previous week’s revised average. The previous week’s average was revised up by 2,000 from 3,042,000 to 3,044,000. “
GDP Results: -5% Annualized
“Real gross domestic product (GDP) decreased at an annual rate of 5.0 percent in the first quarter of 2020 (table 1), according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1 percent.
The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the decrease in real GDP was 4.8 percent. With the second estimate, a downward revision to private inventory investment was partly offset by upward revisions to personal consumption expenditures (PCE) and nonresidential fixed investment.”
Corporate Profits: -295.4 Billion
“Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $295.4 billion in the first quarter, in contrast to an increase of $53.0 billion in the fourth quarter
Profits of domestic financial corporations decreased $67.4 billion in the first quarter, in contrast to an increase of $0.7 billion in the fourth quarter. Profits of domestic nonfinancial corporations decreased $169.5 billion, in contrast to an increase of $53.7 billion. Rest-of-the-world profits decreased $58.6 billion, compared with a decrease of $1.4 billion. In the first quarter, receipts decreased $72.7 billion, and payments decreased $14.2 billion.
Durable Goods: New Orders -17.2%
“New orders for manufactured durable goods in April decreased $35.4 billion or 17.2 percent to $170.0 billion, the U.S. Census Bureau announced today. This decrease, down three of the last four months, followed a 16.6 percent March decrease. Excluding transportation, new orders decreased 7.4 percent. Excluding defense, new orders decreased 16.2 percent. Transportation equipment, also down three of the last four months, led the decrease, $23.9 billion or 47.3 percent to $26.6 billion. “
Earlier this morning, Dow futures had been up as much as 150 points. After the data now, we see the markets…UP 187 on the Dow…
One was released Wednesday in the Fed’s Beige Book report. Here’s the part that matters:
“Overall Economic Activity
Economic activity declined in all Districts – falling sharply in most – reflecting disruptions associated with the COVID-19 pandemic. Consumer spending fell further as mandated closures of retail establishments remained largely in place during most of the survey period. Declines were especially severe in the leisure and hospitality sector, with very little activity at travel and tourism businesses. Auto sales were substantially lower than a year ago, although several Districts noted recent improvement. A majority of Districts reported sharp drops in manufacturing activity, and production was notably weak in auto, aerospace, and energy-related plants. Residential home sales plunged due in part to fewer new listings and to restrictions on home showings in many areas. Construction activity also fell as new projects failed to materialize in many Districts. Commercial real estate contacts mentioned that a large number of retail tenants had deferred or missed rent payments. Bankers reported strong demand for PPP loans. Agricultural conditions worsened, with several Districts reporting reduced production capacity at meat-processing plants due to closures and social distancing measures. Energy activity plummeted as firms announced oil well closures, which led to historically low levels of active drilling rigs. Although many contacts expressed hope that overall activity would pick-up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery.
And It Continues…
Employment and Wages
Employment continued to decrease in all Districts, including steep losses in most Districts, as social distancing and business closures affected employment at many firms. Securing PPP loans helped many businesses to limit or avoid layoffs, although employment continued to fall sharply in retail and in leisure and hospitality sectors. Contacts cited challenges in bringing employees back to work, including workers’ health concerns, limited access to childcare, and generous unemployment insurance benefits. Overall wage pressures were mixed as some firms cut wages while others implemented temporary wage increases for essential staff or to compete with unemployment insurance. Most Districts noted wage increases in high-demand and essential sectors, while wages were flat or declining in other sectors.
Pricing pressures varied but were steady to down modestly on balance. Weak demand weighed on selling prices, with some contacts noting discounting for apparel, hotel rooms, and airfare. Several Districts also reported low commodity prices, including oil, steel, and several agricultural commodities. Supply chain disruptions and strong demand led to higher prices for some grocery items including meat and fresh fruit. One District reported that firms faced additional costs related to safety protocols and social distancing compliance, while another District noted that the costs of personal protective equipment had risen due to strong demand.”
I can’t speak for other “small-time market players” but to me, this is NOT the kind of national assessment that would inspire great confidence.
In fact, our judgement of the Fed remains harsh (we think they should raise, not play the zero lower-bound game). Our judgment of America remains sound, but only to the degree to which people are still able to think for themselves. Given the Digital Online Uprising, sparked by social(ist) media – mostly failing from declining ad revenues – that last precious asset (“American Vales” like honesty and fair play) are quickly declining.
After Today’s Close
WE are anxiously awaiting the release of the weekly H.6 Money Stocks report. Because in it, (Table 2) we will see the most-recent “sliding window” of Making Up Money (MUM) policy.
Tomorrow morning, we will dutifully report the nont-seasonally adjusted (NSA) annualized rate of hyperinflation based on the most recent month of printing.
As of last week, money supplies were going up at a 171% annualized rate. Which – for the few of us left with any mental acuity at all – means Gold and Silver values haven’t change. The reason prices have changed is debt is being off-loaded into paper. The Dollar’s value is reduced because there’s so damn much of it.
The sheep-herding media falsely worships the Fed while our money is rotting from the inside-out. Values don’t go UP. Prices however do. Because we’re Making Up Money nowadays.
W.D. Gann’s Lesson – Mid 1930s
Legendary stock trader W.D. Gann wrote a brilliant book, first copies of which date back to 1923. The Wall Street Stock Selector. But, by the late 1930s the expanded version of the book began with a terrible indictment of the Federal Reserve. A quote to make the point:
“Chapter 1 – New Era in Stocks or Changed Cycles?”
“During 1927, 1928, and the first half of 1929, there was much talk of a new era in the stock market and the great value of the Federal Reserve Bank in preventing panics. Many economists, bankers, large financial operators, and businessmen said that the day had passed when there would be panics caused by money conditions such as had happened in 1907 and previous years.
At the same time these people were talking about the millennium in financial afairs and the stock market, but they seemed to have forgotten what happened in 1920-1921. The decline of 1920 and 1921 folloowing the great Bull Campaign of 1919 was due to “frozen loans” and tight money.”
About here, Gann and Ure part ways. Ure sagely notes that the “frozen loans” in the 1920’s worked out better in the longer term than had “super easy” (Bernanke’s helicopters dropping cash) in the 1929 collapse. That we seem bent on replaying today.
This is just one of the reasons we don’t see a happy ending to times ahead. And this brings us to the main takeaway of this morning:
The Crisis of Wave IIs
One tenet of stock market herd-behavior study is that in Elliott Wave terms, people are as optimistic and ebullient about the future as they were at the all-time highs.
So far, we have notched an all-time high in our Peoplenomics Aggregate Index on February 19th of this year. The reading then? 29,059.63.
Even before the news today (in the data festival above) our best reading had been yesterday’s 26,590.03. That’s about 2,500-points shy of bettering the old highs from earlier this year. A time historians may refer to as B.V. – as in Before Virus.
The Strange Attractor
In 1929, as you can see in this chart, the stock market declined 14.6% ahead of the Great Crash. Before that financial disaster, however, the market rallied up to being off its highs just 7.42%.
Present day, our decline was much greater – down 33.18% – but we have been “pulled up” by the Bull market since March lows. In fact, as of Tuesday close, we were only down 8.5% from recent highs. Shades of ’29, redux.
Disease Waves Vs. Social Waves Vs. Markets
If stocks are susceptible to waves of optimism – and surges of denial – at the height of Wave II rallies, might the same occur in disease/pandemic outbreaks as well?
The answer is “Yes of course!” but we need to be clear how the Disease Wave and the QOL (Quality of Life) Waves are inversely related:
There…now you have a fair idea of our outlook toward the Future. Easy-peasy, huh?
Whether it plays out this way is a matter for time and history to sort out. But, one thing is certain: It’s far more useful to overstock here at the “top of Wave II” than it is to be caught unaware if events “hit the fan from over here.”
Last Problem:”Is Herd Immunity” a Lie, Too?
CV-19 is (at least statistically) a bioweapon. All that we’re not clear on is intent.
The Big Agenda Media Lie in-play to watch, we think, is “herd immunity.”
We don’t think there’s such a thing with this kind of virus. While it may be true with short-lived infections, tell me how “herd immunity” works in HIV/AIDS? Or, in tuberculosis? In cancer? Heart disease?
No, many “scientists” will grab for the most-convenient excuses at hand, often. Even if they are wrong. How many great scientists (Galileo or Da Vinci and others?) were forced to capitulate before a wave of “wrong knowledge” at the time.
We’ll be doing more research on this “herd immunity” notion, however…
We notice there’s no “herd immunity” to stupidity. If herd immunity was a real – extensible answer – all the dumb people should have perished long ago.
Data strongly argues they haven’t.
Remember: Skepticism is an urban survival skill.
Write when you get rich,