Fall begins this year on Thursday, September 22nd. We’re already planning ahead.
In my humble view of things, we’ll be dam lucky if the market is anywhere near present levels by then. It’s not like markets won’t decline; we’re at the point of only quibbling over the slope of decline.
Here’s how our Aggregate Index is scoring things today with a dearth of economic news:
As can be seen above, our ultimate downside estimate level for this wave is shown by the orange circle. However, we may have a bit of additional rally to extend the time base, and thus the lower declining trend channel line down to where the orange circle is on – or just above – the trend. Month or two?
This is not (and nothing here ever is) financial advice. Any more than Joe Biden falling off his bike would be considered a course in BMX wheelman skills.
Discerning Inflation is Key
Our problem in setting out a more specific outlook is problematic because of inflation. Which, in turn, is based on how much money the Federal government has to “make up” in order to balance its books.
One indicator of “how the war is going on that front” is seen in this morning’s just-out Current Account Balance report.
Yes, that’s right. We don’t make much in the way of goods here in America anymore. Political negligence – and traitorous energy policies – have inescapable consequences. Such as:
“The U.S. current-account deficit widened by $66.6 billion, or 29.6 percent, to $291.4 billion in the first quarter of 2022, according to statistics released today by the U.S. Bureau of Economic Analysis. The revised fourth-quarter deficit was $224.8 billion. The first-quarter deficit was 4.8 percent of current-dollar gross domestic product, up from 3.7 percent in the fourth quarter..”
Against this (grim) backdrop, the market futures were still up over a hundred by the Dow and 20 by the S&P. Amazing. OK, delusional, then.
Essentially no change. We’ll get a better handle when June jobs data comes out next month.
Placing Inflation Bets
As long as America is “living on borrowed money” it should be clear to anyone with a nickel’s worth of brains that as rent on the money (interest) accumulates, the value (in absolute purchasing power on a units – not dollarized – basis) will decline.
Consider your home: If inflation is ripping along at 10-15 percent it seems like you’re making money. But from a more (Austrian) monetary view, the Utility Value of the house hasn’t changed. Only the (fiat) money chasing it.
One other point about inflation is it can go the other way as well. And therein lies another kind of risk – systemic deceleration.
When prices are set to go up, you might as well buy goods for future needs right now because if you wait, things will cost more. That’s what inflation does.
The silver lining to inflation is that the manufacturing demand doesn’t collapse. People are still buying.
But consider the dangerous period the Fed just navigated: Where deflation was a real possibility. In the deflation case, people have no incentive to spend now because thinking goes to the “Well, it’ll be cheaper if I wait, anyway” way of looking at things.
See the asymmetry problem? During inflations, good production (hence) employment theoretically doesn’t decline much – it at all.
In a deflation, though, the risk of collapse is much greater because consumption takes a header. Unemployment rises, while at the same time the (few remaining — not exported by money-grubbing f*ck) “free-traders”) factories will be closing down for a lack of sales.
Over time, a new equilibrium will assert when people decide to get off sitting on their wallets long enough to buy something. Then all at once, an equilibrium is re-established and a rally begins such as it was lighting up in 1935-1936.
Of course the optimism is quickly overdone (Good Times are here again) and you get what’s called a secondary Depression.
A Well-Planned Crisis?
Conspiracy thinking time, though based on facts. (But good conspiracy theories usually turn all too real in time.)
A most interesting quandary appears for we – the simple tax chattel in all this – who end up getting stuck with the check for everything.
When we realize that the Federal Reserve was facing the “effective lower bound” of interest rates – where America could have spiraled into a deflationary collapse (and attendant hard to fix structural unemployment going viral), the sudden reappearance of seriously rising prices without sufficient change in monetary policy becomes suspect, at a minimum.
Let’s take the supply chain as an example. Being well-played by government officialdom, including and especially in California Ports. While we would like to imagine that the Supply Chain disaster, and the coming Food Shortages are all purely coincidental, the data suggests this is NOT the case.
When a central government has run to its effective limits of borrowing (the Fed has purchased how much in Assets?), what are the remaining tools to make prices go higher – lighting off spending – while at the same time hiding its effective bankruptcy. That is, based on honest accounting which says if you owe more than you have, you’re upside-down. That’s where America is.
With a good supply chain attack (or direct manipulation) all those cars and trucks may still be coming off the assembly lines. But many go to large fields where they are parked bumper to bumper awaiting a critical electronic subsystem. This was gingerly “talked-around” in the Jay Powell who stays in his lane Senate hearings Wednesday.
Hold cars off the showrooms and the price of used cars with some good life in them skyrockets. The Fed can sell back some of its troubled assets they’ve purchased. And the stock market (while declining) will have absolute fitful rallies. All without legislating or printing so much as an additional buck.
If we are at times incredibly skeptical of the “supply chain crisis” – we also see the prosecution of the Ukraine War as another inflation-creating policy. This policy has enabled the Biden administration to royally screw people at the pumps.
And then – look surprised – along will come a “gas tax rebate” which will take a while to pass – will (bet me?) big a huge democrat pander-point just ahead of elections. The plan has been, since the Harder proposal in February, to have a gas tax break last through the end of the year. Just far enough past elections so as to provide plausible deniability. “Will of the people being done!” and other such pap.
“We’ll fix food prices, too!” will be another rallying cry. It’s safe to predict that they will ignore their specific creation of this voter red herring. In fact, by election day, I expect the Bidenistas will blame Vlad Putin for every ill on Earth.
The supply chain is a dodge, as we see it. Not that the vulnerabilities are less real: The Blind Spot That Makes Supply Chain Attacks Inevitable | SupplyChainBrain. But we’re also aware that messing with the supply chain is just another chess move. Takes time. Aqua Security and CIS release first formal guidelines for software supply chain security | VentureBeat. These changes all come slowly.
Even the (rare) rational democrat will accidently let slip on such things. Take the comments as Senator Joe Manchin slams ‘stupid’ EV push, cites Chinese supply chain – E&E News (eenews.net)
I could write an ongoing book about the absurdity involved. Maybe I should. Perhaps as Directorate 153 – our hypothetical dirty tricks branch of government – can be seen reviewing weather manipulation via atmospheric heaters (yeah, they never go away), the attacks on supply chains to drive up OTR trucking and keep auto layoffs from happening, on to the attacks on energy to cut off food and give government “emergency martial law” powers if too many people vote “Bullshit on this!”
Here we go again – more conspiracy grist: Idiots still rule California: Los Angeles may ban new gas stations to help combat climate emergency. Which will create gas lines. WTF are these people out west?
So we won’t. Presented only as fiction of course. See the Comments section for lists of suspicious fires in food handling and processing facilities around the country. BIG numbers – several dozen last time I read – so yeah, makes you wonder. Has statistical analysis stopped working or is there a huge F.U. Public underway by the elites?
Circumscribing our obvious paranoia are stories like these:
Need a Bigger Reason to spin up Ukraine into “starter war” with Russia? Try European Union leaders set to grant Ukraine candidate status. Which will be topped with the traditional “an attack on one is an attack on all” hyperbole. Looks to us like we’re in the Long Wave Economic Depression but for now the audience thinks that hyperinflation is the answer, until the Big Ugly War to blow up all our excess savings and production is loosed on us.
Biden’s Second Front has been opened in the War with Russia. I mean shit, people are dying, so let’s adjust right now that it’s the West’s war on Russia.
The Biden neocon implants (like ast. Sec of War Creation Nuland) opened the first front by tweaking Russian water supplies in eastern Ukraine for 7-years. The Second front was outlined (though not called that) in a pretty good CNBC “explainer” Russia and NATO member Lithuania are clashing over Kaliningrad (cnbc.com).
Since all wars are economic at some level, pay attention to the Monetization headline du jour: Lithuania President Eyes Hike in Defence Spending to Host More NATO Troops. We’re still trying to figure out a “happy ending” to this fairytale.
The Western Biowar II is also ramping up: Monkeypox Vaccine Orders Skyrocket, U.S. Getting 500,000 Doses. Regrettably, this begins to look very muck like a planned jump – from gay sex to airborne hetero – may have been planned for release. Especially when taken with WHO considers declaring monkeypox a global health emergency. This is tantamount to planning options for a potential second lockdown. N95 masks are still cheap – and are gloves.
Bitcoin and the rest of the digital tulips continue to wilt. BTC an hour to the open was still holding over $20,700, but have you read ‘Epic Failure’—Ethereum Founder Issued A Serious Bitcoin Price Prediction Warning Amid BNB, XRP, Solana, Cardano And Dogecoin Price Crash (forbes.com)?
And yet, Digi Hype continues: Bitcoin and Ether Rise. Crypto Traders Find Optimism in Powell’s Testimony.
We didn’t see much corresponding news coverage of the hard questions senator Kennedy of Louisiana was asking. Unless you go looking for stories like Sen. John Kennedy Says ‘We Got A Hell Of A Mess Here’ Tearing Into Fed Chair Over Economy (tampafp.com) and Jerome Powell Admits Federal Reserve ‘Not Getting Our Own Job Done’ (newsweek.com). Think?
On that note, I’ve pretty-well disgusted myself for the morning. No point playing this market until we move up over the top trend line, or we slide under the mid-channel (dashed) line in our view of things.
Time to recycle contents of our water barrels – into the garden after storage. May be putting an aerator in the rain water barrels, too.
Anxious to see how the new corn does inside. Looking at treating some seeds with magnetic south magnetism. And if you thought I was kidding around the airstone and air pump? No, absolutely NOT: Understanding Dissolved Oxygen (growertalks.com).
Maybe a trip to the gas station in the works before the heat comes on again. Because with T-storms due here next Monday, a mid-summer lawn mowing may be ahead. Are we the only ones who look at the 10-day forecast as really the most useful news item of the day?
Write when you get rich,