We begin another week here in the East Texas Outback with me promising to hold the comments short and to the point.
Our logging crew will show up this morning (or tomorrow) depending on how goes the demand at local mills. I’ve still got one ham radio antenna that needs to come down (the NW/SE Beverage, thanks for asking). There are also about 50-trees to mark for cutting to “open up the sky” for the next rack of solar panels.
In terms of “news flow” we’re in a period of “High Hype” and “talking-back Disaster.”
While the head of the (not-really) Federal Reserve was on television mouthing optimism, we need to seriously consider what he is NOT explaining to people about how financial assets are being manipulated by the government’s hyperinflationary spending and printing policies.
Because the Big Story this week is NOT pre-holiday Hype. It’s that the Truth Behind Gold is leaking out. And looks to us like it could sail through $1,800 this week.
No, the intrinsic value of gold never changes. But, its price goes up because in reality the value of our currency is going down. Take more paper — and that’s what we think of when we talk “price.” (Crazy apes, huh?)
Is Your Hair on Fire, Yet?
We reported Friday the two most important numbers in the world – both being ignored by the (highly-manipulated) financial press. To repeat, it’s the summary of the Fed’s H.6 Money Stocks report of last Thursday.
If you’re too “hung” this morning to remember all the way back to Friday, here it is once again:
There are two numbers shown: M1 – the annualized rate of increase in cash and equivalents. M2 is the cash, equivalents, and some time-series deposits. There is also an M3 – but the Fed doesn’t let that outside the house because it reveals too much about how crooked the “financialization of the World” has become.
There are only a few of us “Old Men of the Web” who have been writing about the reality of Alan Greenspan’s hiding the sausage by ending Fed reporting of M3 – but a few honest reporters, especially John Williams of ShadowStats.com has reported a (close) approximation of M3 (which he calls M3b) is now running about 20%.
So, Pick an Inflation Rate
Lets consider the “threat spectrum” of inflation by looking at all three possibilities. The worst-case is an 84.5% annualized rate while the best-case looks like 20%, although each time a stimulus comes out, the country goes deeper in hock.
I’ve used representative numbers from this morning’s futures prices and Kitco spot gold to run these. Here goes – what a year from now could look like:
How to Read This
The first block of numbers (top group) is a typical price this morning (based on early futures pricing) if you were to “buy the Dow” or “buy the S&P” or buy an ounce of gold at spot, or write a check for a middle class home in a middle class neighborhood.
Second block of numbers is how much the gain alone pencils out for an annualized rate possibility.
Bottom block of numbers is “How much will be asset go up per trading day?” This is predicated on there being 253 trading days.. and we could quibble a bit about it, but most years that’s close.
The whole point of this morning is to underscore that when we see the stock futures up 300+ points, we don’t really know which Reality the market is pricing.
One (pseudo) Reality is J Powell’s phantasmagorical view (The US won’t have negative interest rates) that we are not entering a Depression. His main argument, near as I could sort it out, was something that would paraphrase as “We can’t go there because just a couple of months ago we had a great economy going…”
It sounds good, but it’s like the captain of the Titanic refusing to believe his ship was sinking because? “ We can’t sink because just two hours ago we had an unsinkable ship.”
You can see the peril in tying future expectations to a past — and no longer valid — assumption table.
The OTHER Reality the markets could be telegraphing is that not only is the implied high (momentary) rate of inflation here, but it’s likely to persist.
We recognize there is some risk to using a 3-month sliding window of Fed Money Printing Spree Confessionals to look ahead. But, hey! That’s what we do around here!
Just between us, our Aggregate Index of multiple indices (kind of like a meta analysis done on an on-going basis) shows the market is up 31% from its lows of March 23.
Holiday’s Matter, Too
One more factor in pricing the market this week is holiday proximity.
If the lockdowns are loosening, and the sun’s out, people get some vitamin D buzz going and first thing you know, there’s a run-up going into a holiday.
It’s not uncommon in the market for there to be “holiday rallies” and the most famous of all is the so-called “Santa Claus Rally.” Except, in December of 2018 when the old fat guy and the elves, reindeer, and even Mrs. Claus were lined up out back and put out of their misery. Those of us who remember it as the Christmas Eve Washout will never forget.
Where Are We, Then?
Hell if I know. But, cash is our friend when going long, or short, isn’t slam-dunk easy to see.
Decrupting the Color Codes:
- Three yellow boxes – these are the macro trends.
- Left yellow is Wave 1 Down
- Middle yellow is Wave 2 UP
- Right (thin) yellow is POTENTIAL Wave 3 Down
- Inside the first two yellow boxes are red and green smallder boxes.
- Wave 1 Down was mostly red boxes.
- Wave 2 Up has been mostly Green
- Wave 2’s final rally (E) should be to the high of the Blue box.
However, if you are a student of W.D. Gann’s work, you would notice that the 2X1 line down (when the chart is “squared”) would be followed by a 1X1 and there’s a case evolving that the 1X1 Gann indicator could be telling us “Time’s up!”
In any event, look for the market to rally a bit ahead of the holiday. And if the Gann idea is right, then calamity right after (or just before) next weekend’s 3-day’s off.
There’s damn little news to drive, although the US CV19 deaths are effectively at 90,000 and we will likely pass 4.8 million cases globally this afternoon as numbers come in. Maybe tomorrow or Wednesday we pass the 5-million case mark globally.
Now, go ponder the Fortune article “The ‘valuation gap’ between stock market winners and losers is highest in 20 years, according to Goldman Sachs.”
So What Really Matters?
Cereally? (“News” – the Breakfast of idiots!)
CNN is sounding a bit like us in “We’re already in a Great Depression.”
What about Mr. Flip-Flop who sent sick people to nursing homes where unifected people were infected? Is that why Cuomo says nobody should be prosecuted for COVID-19 deaths in N.Y.?
Sick of climate change bullshit? Well;, CNBC isn’t “Climate change is fueling extreme weather that lowers cancer survival rate and threatens prevention.” Huh? If your pee-pee falls off, it’s from climate change, right? If you fart? CLIMATE CHANGE!!! (God people are stupid. Climate is centuries. Today is weather.)
Here…another imponderable for Monday: Russia Is a ‘Distinct Civilization,’ Putin Says. OK….und zo, Vlad? ( could argue Los Angeles is a ‘Distinct Civilization’ but that’d be playing it fast & loose’ with “civil.”
Mornings like this? A Bloody Mary makes more sense than coffee…but we don’t do that. So time to go work my ass off till Miller time. Have a chipper Monday and more tomorrow.
In the markets? Run ’em up, then mow ’em down, feels like…but let’s see how the week goes.
Write when you get rich,