Last Thursday morning, before the open, I told you what we believed was in the offing: A good-sized market decline this week. Specifically, this part matters:
” And based on this (wildly delusional, incredibly speculative, and obvious whack-job) line of thinking, we anticipate the S&P 500 could trade down to 2,473.98 and (again this is whack-job forecasting) by the end of next week.:
Since, not a single reader sent roses, we will point out that Wednesda following Jerry & the Fed bumping rates up Wednesday, the S&P traded as low as 2,475,75 Wednesday,
How many websites FOR FREE have called the S&P within 1.77 points 168-hours in advance, I ask you? Only one comes to mind but maybe there are others….
This is why Peoplenomics.com is a steal at $40-bucks a year, by the way. We occasionally figure outl this, or that. Tell Santa to pony-up.
The next move – based on our newly-evolved system of “trading boxes” laid out in our Peoplenomics report yesterday – should be a nice solid bounce. But of short duration.
Unfortunately, the specific bounds of the bounce are a little more difficult, but given how our timing boxes hint at future, we’re expecting a rally into either Christmas Eve Day (the 24th, Monday) or to Boxing Day the day after Christmas which would put us at the 26th. After that, we’ll be rejoining the dust bunnies under the bed because the next low in our work ought to be along shortly…well, let’s say that for the Peoplenomics subscribers; the folks with the loge tickets.
Point is, when we look at the “only chart that matters” this morning, there’s not a lot to say except that the Fed, being (in theory) smarter than us, seems to think that raising rates in here is a non-political, policy-neutral thing. A pop to Christmas might rhyme with the yellow circled pop in 1929.
Was the Fed Right to Raise?
There are plenty of warning signs on the horizon that the US is heading into a recession next year and, in our view, the Fed is acting in a totally partisan way that has just won the White House for democrats in 2020 the same way Hoover was left holding the bag in 1929 when the Fed raised too much in the lead-in to the 1929 collapse.
I listened to the Fed Chair waffle his way through reasonable questions, but he stuck by his guns holding that the Fed outlook for 2019 is a “very solid one.”
Male Cow Crap.
A reality check of some headlines overnight reveals, among other things, that the “U.S. Population Grew at Slowest Pace in More Than 80 Years.” As this trend continues, something we call the Reality Ratio (price to dividends paid by leading companies) falls apart. Company share prices are comprised of two things, understand: What they can pay in the way of a return to investors via a dividend plus what the shareholders look forward to in terms of share prices. If the future isn’t brighter than now, why buy?
Also, how did they miss:
- Oil slumps 4 percent to lowest in a year as stock markets sink
- World stocks slide as Fed aggravates recession fears
- Asia’s central banks have almost no reasons to hike rates in 2019
- Aluminum plunges, Rusal shares soar as U.S. to lift sanctions
When the Fed goes off half-cocked as I think they have this time, the cost of borrowing (cost of doing business) goes up. And that means less income falls to the bottom line, or down low in the financials where it MIGHT be available for a distribution of profits to shareholders (dividends). When the money available to pay out declines, the “story” among investors dims. We greedy capitalist pricks buy based on future prospects of higher prices and what Jerry and the Fed did wasn’t in our interests.
If the price of a stock is $100 in today’s market, we see the ripple outs of excessive rate hikes a year or two out. As dropping the future price of the same stock to something like $90-bucks.
This is spread over billions of transactions on the consumer side and it doesn’t show up as corporate dividend decreases until a year, or further out, but it’s the same damn mistake the Fed made in 1928 and 1929 believing they could raise rates at the top of a bubble. History begs to differ.
Yeah, they can do that. But it speeds up the bubble-popping process. But to us, it looks like the Fed decided the democrats should win 2020 and there should be a spanking of the economy, their POPPING of the growth bubble yesterday, which will be unseen for 3-9 months.
Let me tell you why. Say you own a company and you have dead-level year-on-year sales. Your raw materials costs have not been going up because globally, we’re still in a deflationary environment. Still, thanks to the Fed hike, your suppliers are going to bump up prices for your raw materials by a few bucks in 2019.
When this happens, old Harry Zawickee out on the production line will have his hours cut. That’s because your company needs to show a bottom line, either to the shareholders if public, or the spouse if you’re a married head of a small business. Harry’s hours are cut a bit…and everyone is happy. Harry works harder or…else!
Except for the Satellite TV outfit Harry watches. Harry dumps all his premium channels and what happens? Thousands of other “Harry’s” around the country do the same thing.
Inside the Satellite provider now Q1 of 2019, marketing warfare breaks out. “That new fiber technology is killing us” says the sales manager. “Toughski shitsky, give me revenue or I’ll give you death!” screams the greedy-prick CEO.
This goes on for a quarter, or two, but in the end (coincident to the market high of 8/31/2019 ahead of next fall’s Collapse Part 2), regardless of reason, the sat dish outfit earnings show a decline and they jump in the drowning pool with the rest of the telecoms that begin to suffer, oh, next summer, say.
While the market sails up to a rebound high from the decline we have been in since this turd of a market began to roll over in 2018, by then – going into next fall – it will be clear that not just telecom, but everything else is no longer growing. “It’s the costs, George, it’s the costs…we need them to come down further and faster….” explains the small business owner. “We got a nice bump from the $30 oil, but it’s not enough…”
By next fall, as all the costs of Fed largess ripple through the teetering economy, the Fed will realize (because the public is really smarter than the Fed) that they overplayed their hand. Oh well, bankers don’t like Trump anyway. Besides, bankers will have plenty of “cover to hide under” in 2019 with the impeachment trial the democrats will be grandstanding before their fellow Fools on the Hill.
Average prices of homes sold will in coming months begin to decline…and few will connect the dots. A young couple will still need to pay whatever they can for a home (say $200,000, so $2,000 a month for note and taxes) but the amount going to the seller will drop a bit because money will be going to whom? The Banksters, of course.
Not everyone, every sector, or every vertical market will suffer equally. But, over time, as the Greater Depression of 2020 begins to firm up, the price of oil will drop into the 20’s and global temperatures will be in continuing decline because the NOAA outlook is for an extended solar minimum. Yes, a fine time will be had by all.
Speaking of climate change: You did see the tornado this week up in Port Orchard Washington? ) Across the waves 12 miles as a seagull flies west of Seattle? As KOMO news reported here, this was the strongest (F2) in the state since 1986. Which was, oh by the way, where in the solar cycle? But hey, don’t mind the DDNJITW (data-driven nut job in the woods).
The tornado of 1986 in Washington also came proximate to a solar minimum, too – the sunspot cycle was bottoming but would recover to a high almost 6 years later: in February of 1991. Lesson for all the sober boys and girls this AM? Freaky weather happens when the Sun’s napping-out…We’re also due for another big quake.
While “climate” change has been continuous since the Ice Age, the monetization slam is a new scam. People gloss over longer-term data but here’s the kind of historical snippet (this from 2014) that keeps us sluicing through historical data over at weather.com. Remember this is a 2014 story but relevant:
“The National Weather Service says the summit of Mount Mitchell, N.C., recorded a low of 24 degrees below zero Tuesday morning, the lowest temperature recorded there since Jan. 28, 1986 – the same day cold weather caused the Space Shuttle Challenger disaster at Cape Canaveral, Fla.”
All of which tells us what? Other than look for new lows this winter and next at Mount Mitchell? Oh, how about “Don’t be an astronaut till things warm up?”
Back to point: The Fed hike telegraphs the following:
- Democrats will win in 2020
- The purchasing power of money will be further watered-down
- This in turn will help the Gold, Silver-Palladium complex which are (no surprise) up today
- The market will have a short pop maybe through Christmas.
- The the REAL point is: When a Bankster says “Well, the outlook has cooled, but we’re going to raise rates anyway…”
Don’t trust ’em as far as you can throw them. They are driving under the influence of Variable Value Money. They need to take Goldalizer and get into Interest Rehab. The Federal Debt is going higher and until we actually pay down something on it, this is the track we’re on..
Oh, look: futures market is going positive. “Why is we ain’t surprised?” Bheck back with us before the Ides of January. And bring a barf bag. You may need it January 8-10. You can thank me later.
Collusion or Bad Russians?
We offer without comment (except to say the Russians ARE trying to influence American elections) this State Department press release:
“Today (Wednesday, right?), the Departments of State and the Treasury took joint action against Russia’s continued and blatant disregard for international norms.
Specifically, the State Department added 12 individuals and entities to the List of Specified Persons (LSP) pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) for being part of, or operating for or on behalf of, the defense or intelligence sector of the Government of the Russian Federation. These persons were involved in a wide range of malign activities, including attempts to interfere in the 2016 U.S. election, cyber-enabled attempts to undermine international organizations, and the brazen use of a chemical weapon in an assassination attempt abroad. Several of these persons were related to Project Lakhta, a broad Russian effort which includes the Internet Research Agency that has sought to interfere in political and electoral systems worldwide. As a result of this action, any person determined to knowingly engage in a significant transaction with any of these persons will be subject to CAATSA Section 231 sanctions.
In addition, the Treasury Department designated several members of Russia’s Main Intelligence Directorate (GRU) and individuals and entities related to Project Lakhta, including the twelve persons added to the LSP. Treasury also designated Victor Boyarkin for having acted or purported to act for or on behalf of Oleg Deripaska.
The sanctions and listings undertaken today are one part of an aggressive stand against the irresponsible acts directed by the Government of the Russian Federation. Russian intelligence services’ cyber operations continue to seek to undermine democratic elections and delegitimize international organizations. Additionally, it is clear that Russian intelligence operatives used a military grade nerve agent to carry out an assassination attempt inside the borders of our closest ally, a violation of Russia’s obligations under the Chemical Weapons Convention.
We will not tolerate attempts to interfere in our democratic process, and we will side with our allies and partners against Russian subversion and destabilization. We will continue to work with our allies and partners to take collective action in response to irresponsible and malicious acts supported by Russia and its intelligence agencies.
Only question is what did Trump know and when?
PC Victimhood Rising Dept.
Lacking real growth (new products and pop growth) we see how yet-another monetization is ascending: We file these under “Let’s make CLOTHING racist“…
The story (and the comments) all go to support our evolved view that digital media causes mental disorders. We look forward to the DSM 6 which will replace DSM 5 and please, lots of focus on social if we could?.
Now, can I have my do-rag back?
What do you mean, that’s not a do-rag?
Oops! The Writing Fedora…
Off to run more numbers until, as always, we’ll have moron the ‘morrow… Email me if you need to know where to drop off a new Porsche for us…