There is a mighty dance underway – somewhere between a waltz, the boogaloo with a side of the twist – and behind it, a major debate. Seems about half the smart people think news drives markets. The rest believe that’s wrong because any damn-fool can tell markets drive news.
This week, we’ll be watching the dance contest closely. For the moment, we have tilted our future expectations toward markets drive news.
Let’s start with stocks: We anticipate a slightly lower market today and tomorrow. That’s because of the Federal Reserve meeting gavels-in tomorrow and the subsequent rate non-decision Wednesday. Down markets ahead of a rate decision may be thought of as an attempt to “strong-arm” the Fed.
A look at longer-term interest rates is in order, with a particular focus on the 10-year bond yields. You may remember (or not, it is Monday, after all) that earlier this year the 10-year touched 3.11 percent. Then it sank despite a rate hike.
As of Friday, it was back up to 2.96 percent, but that’s still 15-basis points below the summer high. (A basis point is 1-100th of one percent. So 0.15% is 15-basis points.).
Most people don’t do well with “long-chain business models.” They’re somewhat invisible. When a business or entity takes an action that takes months – or even years – to materialize who notices? Besides us, I mean.
The Federal Reserve owns one such long-chain business model. They control the nation’s money supply but there is substantial hysteresis (change off-set) between policy move and results. They also report the money supply on a delayed basis and aren’t especially transparent about day-to-day moves.
Recall, we have publicly worried that the nominally non-partisan Fed might be a little democrat-leaning since so many of the rich are in reality major democrats. Look up Warren Buffett’s contributions, just as an example. The democrat machine’s public bash that republicans are the Business Party is a joke if you really look at cash flow and visit www.opensecrets.org. Republicans are almost an endangered species in the South Bay Billionaire leagues.
Back on point: Our models suggest that a Fed hike might actually slow the Trump growth rate which has been impressive, regardless of the well-orchestrated Trump bashing. Almost predictably this morning, here comes the Washington Post with an article designed to reassure (and re-sell) the idea that the Fed doesn’t consider politics. Yeah, right, sure, you betcha…
The story works on the peeps because of the time-lag offsets. How could what happens in Summer impact things on winter’s doorstep?
Looking at markets today and tomorrow seems like there could be a small to modest decline in the Dow and other indices. But then, when the Fed doesn’t raised rates this week, we expect a smoker of a rally to follow and it should last even beyond the August expiration of options. That’s August 17th if you don’t play nuclear finance, the home Retired Old Fart’s Edition.
The average historical high for markets has come around August 26 if you either a) read the Trader’s Almanac or b) keep daily trading and market logs, of c) if you’re like us – and do both.
This is never financial or trading advice – and our recent disclosure on the Peoplenomics.com site of how our Golem Spreadsheet predicts such things might be seen as aan academic discourse toward a semi-mechanistic trading tool and nothing more.
By the way, subscribers are reminded all four posts on PN about the Golem will be coming down in three weeks. We don’t want too many people knowing about how it works and that includes our recent discussion of Probability Quadrature as part of the files that will be “disappeared.” Snooze you lose, or smoke and be broke.
My guess is that we will be seeing a major “Sell the rumor, buy the News” week. But, a rate hike? A big flushing sound before Friday.
The Housing Question
If you’re wondering what could add to downside pressure tomorrow? How about a leveling off of the S&P/Case-Shiller Housing Index which comes out then? Yes, a regular column plus an update when the data arrives as usual.
The reason to consider shading bets on housing a bit is the commodity futures early were showing lumber down more than 3 percent! That is a long-lead indicator. I expect if you spray-painted a tree and followed it from the woods to the home site, you’d find at least 90-day or longer of lead-time. The charts say Lumber had already peaked back in May around options time.
This actually suggests a lot about what to expect: If we assume that futures prices are offset from real-time actuals for home prices, we could look out four months – and infer that Housing starts would begin to decline a bit from year-ago levels in August or September data. Depending on the offset (which is where probability quadrature thinking becomes useful) we can ‘back up’ a month or two and expect the Case-Shiller numbers to begin hinting at a post 2009 low secondary peak or even initial look of a rollover.
The challenge for Trumponomics then is whether this is merely a seasonal fluctuation or whether this is the start of something bigger. We won’t know that for a while, but when you look at the futures (maybe once a week is all it takes) pick a few easy ones – wheat, oil, a food item or two, and lumber – and you can get a sense of what’s ahead for the day-to-day economy.
A large part of the West continues in drought, driven more by ENSO – the El Nino/Southern Oscillation and here’s a dandy Technical Discussion from NOAA. One ENSO result is major change in the moisture patterns for the western USA.
Despite the climate change mantra, we see that “…Throughout history, California has experienced many droughts, such as 1841, 1864, 1924, 1928–1935, 1947–1950, 1959–1960, 1976–1977, 2006–2010, and 2012–2017.” Gosh, pre-auto…why how dare they!
But, gosh golly, who needs data, right? And let’s paper-over heat islanding.
And it never stops, oh, CNN from rolling with The fingerprint of climate change: Heat, drought and wildfires. To a simple-minded dolt like myself, this sounds more like the fingerprint of Summer.
Could this relentless hype be a path to a global climate tax and thence global government? Watch the hype ratchet up. Too cold? Clkimate change. Floods? Climate change. Lake-effect snow? Climate change. Mid 70’s somewhere? Climate change.
If you think the EU system of mismanagement is bad, picture global government! Gad-zooks. Once again, most of the herd does a miserable job of connecting dots, instead keeping their noses buried firmly in the tail in front of them. Government is BUYING climate conclusions for big money and grants. What the hell would you expect the data to say?
On point: Cattle herd sizes may come down (less feed) and you can see in the futures prices for live cattle that when the drought became apparent in February, the prices of hamburger on the hoof began to drop.
Notwithstanding, the fires in California are a bitch. Complex fires in Mendocino and Lake counties have torched 30,000 acres and the NY Times reports a total of six dead from the Carr/Whiskeytown fire – so far.
Oh! Adding insult to injury? 2 arrested for alleged looting during California wildfires. Great society we live in, huh? Both under 30…one under 20.
Terrible fires have hit Europe, too, with one fire in Greece killing 91 people (so far). It was likely arson. In fact, in the ABC coverage, this caught our eye: “Government officials said last week that investigators found “serious indications” that the fires were deliberately set, saying they were started in at least 22 different locations.”
Of course, no one in the EU can think or speak in anything but “politically correct” gobbledygook, but we’re put a dime side-bet on terrorism from…oh…you can figure it.
Speaking of Terrorism…
One of our reliable readers had a most interesting comment on one of our stories. Scroll to the second comment down beginning “Dear Mr. Ure” which sounds a lot like a certain expert news analyst in Winnipeg. Beings with “Further to the Webolution...”
It recounts some nitty-gritty on how FB groups are being manipulated… Why, who would have thoought? But if you haven’t understood that militant terrorists are using social media as a front line tool to support socialism on the way to theocracy, you’ve led a very mentally inactive life. Try to keep up with the class.
News Impacting Future
Bernie Sanders’ ‘Medicare for all’ bill estimated at $32.6T, study says. As ever, we remind you that socialists love to spend other people’s money. Next item?
Globalists will no doubt point to this as a reason NOT to BREXIT: Deutsche shifts chunk of euro clearing to Frankfurt from London. More clear-thinking Brits (both of them) will stand their ground since the jobs are gone now…so press ahead returning to the royal version of freedom. Next?
Global Webolution seems to be popping up elsewhere as Cambodia’s ‘Illegitimate’ Election Has Been Rejected by Main Opposition Party. Oh the joys of digital mob rule (DMR), huh?
Digital Mob Rule is showing up elsewhere, as well: The unhinged anti-Kavanaugh left gears up to attack a Christian family man who feeds the homeless, says one network.
Speaking of which, here’s a thumbnail of other bashes du jour: Trump slams ‘haters’ in media, threatens shutdown over border wall; Manafort trial preview. Never stops.
Battleground of Retailing
We’ve been chronicling the showdown between Amazon and Walmart’s home shopping plans. Here’s a good report on what Walmart plans next. Keep your eyes peeled for deals as things roll out.
Next Western/EU Target?
Hmmm…where is the next “front line?” Here’s a story that just screams manipulation to us.
A story on the BBC about something called “Georgia’s Rave Revolution.”
Timing matters very much in our work on futuring: When a story begins by disclosing:
Wait! MAY??? But then goes on to fan a division between “…youth and conservative far-right groups…” You know what flaming is, right?
We get that sickening sense upon reading this that that hand of the Globalist Deep State has eyes of Georgia as the new “color revolution” to surround Russia with by fanning social media.
This was all be presaged last year in a thoughtful analysis piece in the Sirius Report cexplaining “Why the West Sees South Ossetia As a Threat to Its Democratic Values.”
(The same West that can’t hold a border with Mexico? ViseGrips!!!)
And since South Ossetia is a subset of Georgia and border’s Russia, we think there’s a good chance that dark forces are at work and they can’t stand Trump and Putin talking in meaningful ways. Forces likely not under the control of Donald Trump.
When we see a May event repackaged as July 30th “news.” we see the tipping of hands and the shadows of future conflict.
Just another Monday, huh? Futures up a tad and a shot of peppermint schnapps in the cocoa sounds pretty good…but still too warm. Anyone see winter coming? It’s the one climate change I look forward to…
“Moron the ‘morrow…”