Those of us judging Long Wave Economics are ready with the flip-number boards as the market heads toward what we’d reckon – at first blush – to be at least a retest of the Thursday lows.
After that, it’s anyone’s guess, although we sure like the look of a modest rally for at least a little while next week. It was that kind of pattern in 1929.
My Consigliere Differs
Being another one of those polymath sorts (J.D., C.P.A., pilot, extra class ham, etc…) who was also active in the University of Colorado Long Waves Group when Ure was polishing off his masters in the late 1990’s, I can just ignore his well-reasoned alternative view of what happens next.
You see, he makes the case that what’s immediately ahead could be a clone of 1998. That is, the market will continue its “high board” for a while, but when it gets down far enough (Peoplenomics subscribers will see this as “The Joe Line” on the Daily chart tomorrow), things will turn up and we will get one more run upward to carry us into 2022.
My contrary view is that we will bounce (off “the Joe Line”) but then – just like 1929) we will finish thee “two-and-a-half-gainer” with a collapse through previous lows in late April. A major rally then (like the one beginning from 11/14/1929 and continuing to 4/10/1930. Into late summer.
The modern analog would be a hair-raising decline into mid/late May now – rally over the Summer, and then a further halving of the Market this fall.
“No, it’s too early. There are several indicators including the Spiral Calendar that argue the real break will come in 2022…”
To be fair, this kind of outlook would be ideally played off the short-term trend channel bottom which is nearby as we pencil in early futures this morning like so:
So, the “Trading Cases” are really all over the place.
- One workout would be to come down to the bottom of the trend channel and from there take off to complete the still unfilled trading box. This would argue a higher high into summer and then things fall in the Fall.
- If this happens, we get the possibility of my Consigliere outcome: Which is a sell off, but then higher into at least early 2022. Then crap winds up.
- However, another option would be to collapse now (down to the “Joe Line – which is the top of the Wave 1 of this Elliott count) and then rally, perhaps over summer) and then see things halved again this fall.
- OR, we could have a major drop below the trend channel to wrap up this week, a rally next week, and then follow 1929 down for a near perfect first major low (analogous to the Nov. 1929 first major low) then rally over summer to mid August to early September, and march to the guillotine from there.
As always, we don’t offer advice. Just some financial kibitzing to pass with coffee with while awaiting the call to the throne.
Consigliere vs. Idiot Client (ii)
Although we agree on many things in Life – important stuff like single engine aircraft, best HF radios, and other critical supplies – we also vary on our outlook for Bitcoin in the long term.
His view is more “crypto friendly” than mine. But when I lay it out, I think you’ll see this is like totally graceful economic fiction. Not of the style of my mentor on such thinking (Dr. Paul Erdman back in the day). But read this scenario like a novel and you might enjoy it:
- The novel opens with a computational future group – hidden deep in government – coming up with an “emergency, off-books, bankroll that would fund a future federal bailout. It would be paid-for only by people who could afford to take the loss.
- Under the cover of an odd Japanese name, this bailout plan uses newly minted blockchain as the lynchpin and evolves into crypto currencies.
- The government let’s cryptos run – because the people who can personally help to bail out the crooked elective government will be bidding up the price of the cryptos like mad.
- When the time comes, though, and the government has fired its last round from the official printer cannons, the government makes one final deft move and cracks down on Bitcoin and all other pseudo currencies.
- The effect is to sudden send a how much money looking for a new home? Into stocks flows money.
- So buoyed, normalcy bias is returned. My consigliere’s 1998 scenario comes to pass, and the fires lit by the War Party (democrats went bombing Syria overnight) don’t let economic breakdown in until his 2022 timeline. (We assume you know the amoral neocons changed parties and are now leading the dems foreign policy blood-blunders to come…)
Could It Happen?
Consigliere’s view is that no, the cryptos aren’t big enough to matter.
Ure’s view is they already ARE that big.
Consider, the total Bitcoin pile is what? 16.5 million units *(rounding). Now, multiply that times its highest-ever price: Around $58,000 each.
Simple-minded Ure pencils this as $957,000,000,000. In other words, just under $1-trillion worth (of Fool’s Blocks). And that’s before we count the valuations of more than 2,000 wannabe clones. Maybe, what? $1.4-trillion?
My consigliere figures that’s nothing compared with the $1.9 trillion in (pork and) Stimulus bill that will be rubber-stamped today. The market dropping down to the trend line could just be a little “street corner activist lobbying…”
Thing is, in my (admittedly demented) novel capturing this (is Harlequin Finance a novel style, yet?) the government at the critical moment makes noise about outlawing Bitcoins and cryptos. People bail and the money flows into the only liquid assets left: Massive devalued U.S. Federal Reserve Note denominated stocks.
Like it? Maybe sell a script to Amazon for a mini-series?
Crooked Fed Punishing Lazy
Afraid we have been too direct lately: Pointing out in the Fed’s weekly H.6 Money Stocks confessional how absurd the printing press is firing off pallets of cash.
So with this week’s report on H.6, they “hide the sausage.” No more annual, 13 and 26-week inflation rates. No more simple useful reporting of how the Fat Thumb on the Scale are running things.
Instead, using their own numbers, here’s how annual inflation of M1 and M2 is running by their own numbers:
(We assume you know NSA means not seasonally adjusted so SA means “statistically spiced?”)
In their defense (like hiding the sausage from We the Wee People as ever, right?) they made some definitional changes to M1 which made it look like they were printing at crazy-house rates. Which they were…which is why our National Debt to GDP ratio is “Going Cyprus” while Joe Fiddles and Harris diddles…
As the NY Times reported today: “Bond Markets Worry About the Fed.” So do we, by golly…
Well hot damn! Check out the morning’s bevvy of market sauces being ladled on the hash browns today:
Personal income first: Hopium for the dopiums…
“Personal income increased 10.0 percent (monthly rate) while consumer spending increased 2.4 percent in January as provisions of the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act enacted on December 27, 2020, began to take effect.”
Then International Trade:
“The international trade deficit was $83.7 billion in January, up $0.5 billion from $83.2 billion in December. Exports of goods for January were $135.2 billion, $1.9 billion more than December exports. Imports of goods for January were $218.9 billion, $2.5 billion more than December imports.”
And then Inventory data:
“Wholesale inventories for January, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $661.6 billion, up 1.3 percent (±0.4 percent) from December 2020, and were up 0.5 percent (±0.7 percent)* from January 2020. The November 2020 to December 2020 percentage change was revised from up 0.3 percent (±0.4 percent)* to up 0.5 percent (±0.4 percent).”
Inventories at retailer level:
“Retail inventories for January, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $625.1 billion, down 0.6 percent (±0.2 percent) from December 2020, and were down 5.8 percent (±0.5 percent) from January 2020. The November 2020 to December 2020 percentage change was revised from up 1.2 percent (±0.2 percent) to up 1.9 percent (±0.2 percent).”
This last number ought to goose the hell out of markets. That’s a humongous drawdown on inventory and that means tons of sell-through. But not all dandy, because that could be inflationary, which kills bonds…Well you know how that merry-go-round rolls.
With all this, Dow futures are? Down 106 on the Dow but the S&P is nearly flat and the NASDAQ futures are UP at click time. So our read on retail as super-strong is likely good and a rally after some Big Boy Shorts unload positions could lessen the week’s declines. But, we shall see…
Short and Not So Sweet
With what is it? Five ERCOT board members quitting? Did you see where “Lawsuit filed against ERCOT, CenterPoint after Texas man dies of hypothermia during power outage“?
The “Rubber Stamp Gang” (a/k/a Fools on the Hill) are on the loose. The House is expected to pass the gargantuan relief package today for what Biden hopes will shape the eventual post-pandemic period. More pork than substance…but at least something for the market to turn on…
And – if you read my book Broken Web, you’ll appreciate that the Web may be returning to its “right-sized” roots. This as Twitter goes paywall: Twitter to let users charge followers to see premium posts. Like who’d pay to? We’ve long held that in order for the Web to be genuinely a grass roots deal, these billionaire boys club people were just scamming people by getting social media people to gin up free product (content, posts) for them. Dishonest as hell…but hey! Who cares about ethics anymore, right?
Elaine’s Hip Adventures
Between the quinine and potassium, magnesium, and calcium, plus drinking more fluids, she’s back to over-doing it…again.
Ure didn’t get the supply run done Thursday, so that’s on tap today.
Still wondering why I can’t get Rolling Rock beer included in the curbside orders anywhere in town.
Gotta say, if I’m back to pondering that kind of minutia, things here in Bliz-Tex country are improving.
Ham radio bud Jeff and I had a great conversation about “water purity indicators” – and how Pasteurizing water (150F and up) might be much more energy efficient that boiling. Just longer hold times. Interesting stuff and making such indicators is not terribly expensive. Involves a special wax that melts over 150F…
And the local water outfit popped over an email with updated local scoop: “We are still under a boil notice. We are taking water samples to the lab in Tyler today (Thurs). We hope to hear back from them in 24- 36 hours.”
I’m anxiously awaiting this. One of the problems with a “modern” fridge is the automatic icemaker is not conducive to boiling water and getting that pressured and plumbed into the system…
The afternoon martin without ice is hardly civilized, but that’s how life is out here on the American Frontier, huh? Ice trays going in the prepper stores?
Write when you get rich,