We should begin the discussion this morning with a word (OK, several, then…) about inter-market arbitrage. Europe is “in the shitter” and Dow futures +77 after blowing-off a record high Monday.
Fancy-talk. But the long and short of it is that in today’s massively inter-wired world, you can’t look at markets singularly. They all interact.
Take this morning, for example.
The typical American looks – ultra-simplistically – at the price of gold and goes into panic mode. “ Oh my God, is the run over???”
Meanwhile, however, the globalist/neoclassicist tactician observes the global markets as a whole (see the Peoplenomics twice-weekly Global Aggregate) and observes that things are not “happy.”
Based on early trading today (and giving U.S. S&P futures simple (equal) weighting with the RoW (rest of world), here’s what may be going on:
See the problem? You will see there are two “sets” of what I call trading boxes to consider. The first (green, the smaller three) argue that in Elliott wave terms, the rally in here (from the March lows) has completed. If one believes this count, the interference is that yesterday may have been the beginnings of a larger directional move down. Further, upside action this morning is likely to be the Fed (and G-20) trying to “buy” the alternative count.
This gets us to the Yellow trading boxes. As you can see, there’s a way to count this as a continuation rally into late August – at which time the “real” (global) peak retest would be expected.
Two red horizontal lines, therefore, MAY describe the battle space. The previous all-time global high is the upper red line, while the short-term bullish resistance is the lower.
In terms of futures? Hard to call. That’s your job, not Ure’s job.
Global Conditions Matter – Lots
When we look at the U.S. Market action Monday, what did we see (on an Aggregate basis)? Well, a momentary new all-time high. But it may be a serious fake-out because lots of the increase was coming in stocks like Tesla. Again today, we see that while tons of money are being made by T-bulls, there are headlines like “Tesla Stock Is More Than 100% Overvalued, Warn Top Wall Street Analysts” that almost sounds like shade of ’29.
Back to point: While the U.S. continues in a “Bernanke-induced loose-money may save us” strategy, it may also only cover-up the ongoing slide in real lifestyles.
As I pointed out in a post Monday afternoon, we can see in the IMF report how the Globalist economies are attempting to paper-over the lifestyle decline. Faced with an 11% decline in GDP, what better cure than an 11% inflation to gloss-over – for economic simpletons – what’s really underway?
Old Man Wisdom?
One thing 71+ years of life has taught me is that stock market averages ONLY MATTER if you are playing them to make a little lunch money. The REALITY of getting out of bed and “reporting to The Man” daily is about lifestyle maintenance.
Most people pay scant attention to whether a Second Depression is forming. What matters more (in lifestyle terms) is that “well drinks” that used to be a dollar are now five. Cars I could buy new for $2,800 in 1968 are costing $28,000 (and up from there) today. What did we get in actual value in return for this ten-to-one devaluation of purchasing power?
Air conditioning and power windows and door locks. The rest is all Ben Dover, it’s the Money Stupid. Becoming worthless just slowly enough that there’s nothing to
“jump out of the frying pan for.” Except for idjits like us who had the good sense to tell the system to tell the world “Piss off…we’re retiring to no-profile and living in the woods. Ya’ll have fun…..”
Consumer Prices – Foreplay
If you’re thinking “Say, that’s a pretty clever idea, papering over the Depression…think it will work?”
No, of course not – not in the long-term, any way.
But, close-in, sure!
The reason is the once-Greatest Nation – able to kick Germany’s and Japan’s asses at the same time in World War II – has bent itself over for all comers. We gave up Production Autonomy for the Greedy Hedge Pricks (GHPs) in New York. Since there’s 100-to-one leverage buying influence in Congress, stupid con-artists in office (many still there, returned by stupider voters) simply allowed the “miracle of cheap communications” to kick our butts.
With most of our consumables coming from Asia, there is a 90-120 day lag between actual prices paid today and the “booked price” which happened 120-days ago.
Say you operated a modest country store – headquartered in, oh, Bentonville, Arkansas. for example. You need for August to have 123,451 HD TVs for a big summer promotion. The order doesn’t go in now…with only two weeks to the Big Sale. That order went in four-months ago.
That gives people in China 30-days to order components, 30-days to stuff and flow printed circuit boards and load them into televisions and box them up. Then 30-days for transit to the Chinese port, ocean freight, and offloading in Los Angeles or the far side of the viaduct at Long Beach.
Now, though, we still have to navigate the intermodal mess: Those TVs will be sent to the “little country store’s” distribution centers. Then, and only then, will they be ready for dispatch (next week) so that the regional Superstore managers can get those end-cap promotions set for the August 1 sale.
This time-lag (inflation comes on slowly) example makes the point that whatever you are playing today is often priced at retail where things were a month, or two, back. Following how this “long-chain supply channel” works?
This morning’s data reflects a lot of APRIL commitments.
Consumer Prices: 7.44% Annualized
Knowing there is a fair bit of “time slop” in how consumer prices change (come on slow when inflation is increasing; go down slowly when deflation arrives) we can now much on the presser just out of the Labor Department on Consumer Prices:
Drilling down: Page 2 here reveals Fuel Oil is down 29.9% year on yet. On the upside? Medical care is up 6% Year-on-Year…
Don’t worry, the numbers Social Security increases will be based on, will show remarkably small increases to keep the old in their place. Then the real inflation will be along…bank of it.
This doesn’t mean that consumer prices will go instantly to the moon. But, we are planning to upgrade my office equipment for Urban. A new i-7 with 16gb and several large SSD’s will land in a week. And I don’t see a larger 65″ UHD TV (monitor for the sight imparied me) as getting much cheaper than they are right now.
Unless, of course, CV-19 goes even crazier. But do either of us want to hang out at estate sales?
Tearing Apart the NFIB Optimism Index
New Small Business Optimism index is out from the National Federation of Independent Business. A little something for the Bulls:
“The Small Business Optimism Index increased 6.2 points in June to 100.6 with eight of the 10 components improving and two declining. Owners anticipate improving sales as the economy continues to re-open with sales expectations rebounding to a net 13% after April’s lowest reading in survey history (a net negative 42%). Small business owners continue to be optimistic about future business conditions and indicate they expect the recession to be short-lived.”
But a little something for the Bears:
“Down from May, 48% of owners reported capital outlays in the next 6 months, the lowest level since December 2010. Of those making expenditures, 32% reported spending on new equipment (down 3 points), 18% acquired vehicles (down 2 points), and 14% improved or expanded facilities. Five percent acquired new buildings or land for expansion and 9% spent money for new fixtures and furniture.
Twenty-two percent plan capital outlays in the next few months, up 2 points from May. Plans are trending up but remain at recession levels.”
No whiz-bang MAGA miracle in sight here. Move along…
Is Trading “Gambling?”
American investors are a pretty sorry lot. The story on CNBC this morning, “JPMorgan shares jump after record trading revenue drives stronger-than-expected quarterly profit” makes it pretty clear.
There’s an article on NerdWallet that pretends the difference has to do with timeframes. Shorter periods are trading, longer term is “investing.” OK, that works, but not exactly.
Around here, we look at things in more casino-like terms. Therefore, we see trading as “When the hot money thinks it’s smarter than The House.” Investing is Betting with the House.
Given that “JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York City,” they can call themselves what they will. And gamble all they want.
It may – in these odd times – pay off better than straight banking as we saw that Wells Fargo reported $2.4 billion loss for the quarter, cutting dividend to 10 cents.
We’re just a lot more open about calling our modest “trading” gambling. Maybe because we don’t have a PRSA certified PR operation to sell our goods…
In Ure Shorts
What catches our aye this morning?
Stiffs are still piling up as the ongoing debate over CV-19 continues distracting millions. We simply look at cases and death rates in heavy masking countries (*like Japan with only 984 deaths as of now) versus countries full of arguing idiots. Like us. With 135,615 deaths and still climbing.
I dunno: Sometimes the numbers just “talk to me.” Which is why, from mid February, we’ve been masking and bleaching everything from off property. But, in fairness to people who detract from our data-based view: I have the co-morbidity to worry about. It’s called life.
Meantime, USA Today has a good round-up under the heading “Coronavirus updates: Cuomo takes heat over nursing home deaths; California tightens restrictions; New York sends testing teams to Atlanta.”
Our fearless forecast is that Globally, we will be around 30-million cases by Labor Day. with a global death toll of 877,881. Here in the Land of the Free (to not mask) we project 7,985,851 positives by then. With a total of 252,581 projected fewer taxpayers by then.
Just Beyond “19”
Speaking of Covid and Taxes, did you see where some millionaires are stepping up to pay higher taxes? Examples: Richard Curtis wants higher tax bill to help UK economy’s Covid-19 recovery.
If Donald Trump doesn’t stop talking foolishness pretty soon, it may come to matter that Newt Gingrich (says): Biden’s tax increase proposal would kill jobs, bring US to deep recession. Why, one can almost see a pattern of GOP pump and dump and then democrats batting clean-up. Question is: Is Biden really the best the dems can come up with? Oh, we are sooo screwed….
The Political Correctness Wars: The Washington Redskins are going to “retire the name.” This sets up a “sports-domino collapse.” The Kansas City Chiefs I see with a name-cloud hanging. How long before BLM forces the Minnesota Vikings to become more racially balanced? And yeah, only a matter of time before the New England Patriots are banished for conspiracy to hold down the rise of ‘ Merican Marxism.” (Like I said, we are sooo screwed…)
We’ll leave it to PETA to deal with the Tigers, Lions, Dolphins, and Bears.
“Legislating from the Bench Department. “ There goes judge Amy Berman Jackson again: “Judge asks for more details on Trump’s clemency for Roger Stone.” I’d have to check with my consigliere on this, but I don’t think a circus judge can question a Presidential Pardon with any authority. But, that doesn’t slow the “news” clowns from piling on with another blast of anti-Trump opinioids.
OK, big day. Have a great one and off to chase food and nail down more Peoplenomics research.
Write when you get rich (or evicted)