Markets: PLHF (Pump Like Hell Friday)

The US Fed seems to be trying to stabilize markets in here.  The latest H.6 Money Stocks report reveals the Fed let a lot of air out of the market by only growing the 90-day M1 (cash) at a 1.7% annualized rate through the end of November.  However, now we see that run rate is back up to a 4.9% annualized growth rate.

Armed with some cash, the Big Boyz of Wall Street can go share-shopping.  But, the real question is “Will they?”  For more than a sharp pop-up day-trade?

I will tell you three critical numbers to watch because today marks the end of the first trading week of the new year.  In order to coax the Bulls out of hibernation (an odd thing for a mammal, admittedly), the market need to close above Friday December 28 levels.

Which were?  For the Dow, that would mean a close above 23,062.  We don’t do fractions around here until after lunch. Based on futures pricing before the opening, the Dow might not make it.

For the S&P 500, the “number to beat” is 2,484. Here, based on futures pricing (5:52 AM Central time) this could be a close horse race.

As for the NASDAQ Composite?  The battle line looks like 6,585 to us.  Again, though, the future’s aren’t calling for higher.

But, “Hope springs eternal in the hearts of men” and maybe those running the NY Fed trading desk.

Will “Soft Hyper-Inflation” Work?

What’s very apparent to us is that the Federal Reserve is trying (with lots of computational economic and modeling support, we imagine) to “Paper Across the Gulch.”  Here’s what the “gulch” looks like:

The dynamic that damn near killed the American economy in the Great Depression was the people lost their incentive to spend money.  Between 1929 and 1933, your money would buy 25-30 percent more goods, in absolute terms, than it did prior to the Great Crash.

One reason we didn’t drop into Depression from the Housing Bubble collapse was prices didn’t drop much.  Only 5% more purchasing power and then for a very short window.  That wasn’t enough to kill spending, thus, a recovery followed.

As we explained previously, the 1929 consumer spending collapse was one of the drivers for the government to “call” gold and silver; both were confiscated in the Depression.

This is, in our view, why the Fed is hell-bent on raising interest rates now.  But, not too fast.  Instead of “rock and a hard place” the Fed’s between 1929 deflation and Wiemar hyperinflation.

If the markets panic too much more, the Fed might be driven back to interest rate decreases.  Interest rates could turn negative. These, in turn cap prices, which can resume their long-term declines.  Which (follow me here) is seen by the consuming public as a reason to “sit on their wallets” and that kills sales which, in turn, depresses earnings.

Print & Pray is the protocol.  Think back to the Great Depression:  Had we not been locked to gold prices (which confiscation fixed) would an “easy money Fed” have been able to navigate better?  Maybe, but computational economics makes it, oh, so much easier.

Conjectural Economics is not an “acceptable academic” view.  On the other hand, with a few exceptions, such as Robert T. Ely of Northwestern, most people were taken-in by the Keynesian mob.

Few have read Ely, but to our way of thinking, he was a practical moderate when came down to economic philosophy.  As Wikipedia recounts:

Although regarded as a radical by his detractors on the political right,[9] Ely was in fact opposed to socialism. “I condemn alike,” he declared, “that individualism that would allow the state no room for industrial activity, and that socialism which would absorb in the state the functions of the individual.”[10] He argued that socialism was not needed, and “the alternative of socialism is our complex socio-economic order, which is based, in the main, upon private property.” He warned that the proper “balance between private and public enterprise” is “menaced by socialism, on the one hand, and by plutocracy, on the other.”[11]

Ely’s critique of socialism made him a political target of the socialists themselves. In his 1910 book, Ten Blind Leaders of the Blind, Arthur Morrow Lewis acknowledged that Ely was a “fair opponent” who had “done much to obtain a hearing for [socialism] among the unreasonable,” but charged he was merely one of those “bourgeois intellectuals” who were “not sufficiently intellectual to grasp the nature of our position.”

I disagree and believe Ely totally “got it.”

I enjoy studying Ely.  Especially when we consider “technological monopolies” emergent in today’s world.

When we behold the nearly monopolistic power of Twitter, Facebook, and Google (search), our views are informed by Ely’s 1894 book “Natural Monopolies and the Workingman. A Programme of Social Reform.”

Moreover, the collectivist mindset of Henry George, whose “…writings  inspired the economic philosophy known as Georgism, based on the belief that people should own the value they produce themselves, but that the economic value derived from land (including natural resources) should belong equally to all members of society,” is aptly counterbalanced in Ely’s later book “Ground Beneath Our Feet.”

One of the most profound questions in human history comes into focus as we study the concept of “ground ownership.”

On the one side, we see a case for socially owned and shared property.  The problem lies in the nature of sharing.  You see, that usually morphs (instantly) into taking.

There are solid reasons to support open ownership of land, of course.  Native Americans I know point out their long history was based on equal sharing.

In other groups, too, such as the Baha’i faith, leaders such as Abdu’l-Bahá, said on hearing of a long-ago battle in Bengahzi:

” How is it possible for men to fight from morning until evening, killing each other, shedding the blood of their fellow-men: And for what object? To gain possession of a part of the earth! “

“Ownership” – dominance and the right to tax first and foremost – is, indeed, central to most wars.  Possession is a slippery slope to traverse.

Yet here in the East Texas Piney Woods, we consider ourselves stewards of our small tree farm who would solemnly defend it to the greatest extent possible.

We possess, and believe unto death that sharing that which we create is at our discretion.  It comes not at the whim nor demands of takers.

But, I digress.

With the Dow down more than 650 points Thursday, we wonder whether today will reveal a “dead cat bounce” or, if this old market could yet “go Lazarus” on us, yet.

Given the political intransigence and the testosterone-estrogen warfare  under the guise of “social justice – another taker modality) underlying resurgent (rebranded) socialism attacking anything that moves in national politics, we’re leaning (how should we say?) more than a bit “feline” in our outlook.  YMMV.

Especially so if the US and Chinese sides figure out that a trade war would really amount to the economic version of the old Cold War “Mutually Assured Destruction.”  Which is why market mavens are attempting to play Lazarus-raisers on the back of China-U.S. trade talks a tonic to battered markets.

Meow, anyway. But maybe not until next week, which has been our view for a month now.  We’ll know more a minute to the close at 4 PM Eastern.

The Job Numbers Roll

Just out:

Total nonfarm payroll employment increased by 312,000 in December, and the unemployment rate rose to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains
occurred in health care, food services and drinking places, construction, manufacturing, and retail trade.

The unemployment rate rose by 0.2 percentage point to 3.9 percent in December, and the number of unemployed persons increased by 276,000 to 6.3 million. A year earlier, the jobless rate was 4.1 percent, and the number of unemployed persons was 6.6 million.

We tend not to get too worked up over the data:  In absolute terms, only 143,000 more people were working in December than in November.  And the civilian population was up 180,000 month-on-month so there you go.

Click over to FinViz for the latest market reaction. We think the increase in labor participation rate could drive things a bit higher.

Realistically?  We still have the Impeachment follies ahead along with wondering what will drive the post iPhone world higher?


Don’t have gasoline to light up your economy?  China slashes banks’ reserve requirements again as growth slows.

Yes, we still believe in high MPG transportation as Oil rises to $57 on China-U.S. trade talks, OPEC cuts.

And is this a hint of things to come from the generally liberal-backing CNN? What happens if Mueller comes up empty?

One Book You MUST Read

We don’t cite many books just out that ought to immediately catapult into junior year of high school curriculum.  But  Can’t Hurt Me: Master Your Mind and Defy the Odds is the rare exception.

The Amazon write-up lays out the general idea:

“For David Goggins, childhood was a nightmare – poverty, prejudice, and physical abuse colored his days and haunted his nights. But through self-discipline, mental toughness, and hard work, Goggins transformed himself from a depressed, overweight young man with no future into a U.S. Armed Forces icon and one of the world’s top endurance athletes. The only man in history to complete elite training as a Navy SEAL, Army Ranger, and Air Force Tactical Air Controller, he went on to set records in numerous endurance events, inspiring Outside magazine to name him The Fittest (Real) Man in America.

In Can’t Hurt Me, he shares his astonishing life story and reveals that most of us tap into only 40% of our capabilities. Goggins calls this The 40% Rule, and his story illuminates a path that anyone can follow to push past pain, demolish fear, and reach their full potential.”

It’s a great – no bullshit – square yourself away book.  It’s not motivational because, as Goggins explains, that doesn’t change anyone.  It’s more a “do it yourself kit.” consisting of 10 “challenges.”

There’s only one person who can square you away. Goggins met him at age 17 when he was shaving.  Just a hell of a fine book, tune-up kit, and a pleasure to experience.

94% of 733 reviews on Amazon ranked it five stars. When I get to it, mine will also be five stars, but only because I can’t give it 10.

Reflecting on it, I conclude that only warriors can really share.  Because only they can resist takers.  All others are victims waiting for their takers to show up.

19 thoughts on “Markets: PLHF (Pump Like Hell Friday)”

  1. I think this is the second time you’ve said that silver was confiscated along with the gold back in the 30’s, or that’s how I’m reading what you’ve written, George. I don’t recall it happening back then unless you’re referring to the last of the silver coinage being the ’69 halves for general circulation.

    I’ve certainly been feeling the “incentivisation” to spend over the past year. Keeping your money in cash is a fool’s game given its purchasing power loss. I do not understand the general public’s lack of acknowledgement of this being the root cause for the increase in prices of everything … unless that realization is simply stifled by the manner in which it’s reported.

    • Ure NEVER lies

      Executive Order 6814—Requiring the Delivery of All Silver to the United States for Coinage
      August 09, 1934

      By virtue of the authority vested in me by the Silver Purchase Act of 1934 and of all other authority vested in me, I, Franklin D. Roosevelt, President of the United States of America, do hereby require the delivery of all silver situated in the continental United States on the effective date hereof, by any and all persons owning, possessing, or controlling any such silver, and do hereby require any and all persons owning, possessing, or controlling any such silver to deliver the same in the manner, upon the conditions and subject to the exceptions herein contained, such action being in my judgment necessary to effectuate the policy of the Silver Purchase Act of 1934. . . .

      Section 2. Silver required to be delivered..–There shall be delivered in accordance with the terms of this order all silver situated in the continental United States on the effective date hereof, except silver falling within any of the following categories so long as it continues to fall thereunder:

      (a) Silver coins, whether foreign or domestic;

      (b) Silver of a fineness of .8 or less, which has not entered into industrial, commercial, professional, artistic, or monetary use;

      (c) Silver mined, after December 21, 1933, from natural deposits in the United States or any place subject to the jurisdiction thereof: Provided, however, That so much of such silver so mined in the continental United States on or before the effective date of this order which shall not have been deposited with a United States mint tinder the proclamation of December 21, 1933, shall, if processed to a fineness greater than .8 within 75 days from the effective date of this order, be delivered in accordance with this order, not later than 90 days from the effective date hereof, or if processed to a fineness greater than .8 after 75 days from the effective date of this order, be delivered within 15 days thereafter in accordance with this order;

      (d) Silver held for industrial, professional, or artistic use and unmelted scrap silver and silver sweepings in an amount not exceeding in the aggregate 500 fine troy ounces belonging to any one person;

      (e) Silver owned on the effective date hereof by a recognized foreign government, foreign central bank, or the Bank for International Settlements;

      (f) Silver contained in articles fabricated and held in good faith for a specific and customary use and not for their value as silver bullion; or

      (g) Silver held under a license issued in accordance with Section 6 hereof.

      Section 3. Time and place of delivery..–The silver required to be delivered here under shall be delivered not later than 90 days from the effective date hereof to the United States mint nearest to the place where the silver is situated immediately prior to delivery: Provided, That such silver temporarily falling within the exempt categories enumerated in Section 2, shall be delivered at the end of 90 days from the effective date hereof, or 15 days after the time when it ceases to fall within such categories, whichever date is later. Any person acquiring ownership, possession, or control of silver required to be delivered under this order after 75 days from the effective date hereof, shall deliver such silver within 15 days of such acquisition.

      SECTION 4. Amount returnable for silver..–The silver herein required to be delivered shall be coined into standard silver dollars, or otherwise added to the monetary stocks of the United States in accordance with the proclamation, bearing the same date as this order, relating to the coinage of silver, and there shall be returned therefor in standard silver dollars, silver certificates, or any other coin or currency of the United States, the monetary value of the silver so delivered (that is, $1.2929+ a fine troy ounce), less a deduction of 61 8/25 percent thereof for seigniorage, brassage, coinage, and other mint charges, as provided in such proclamation; that is, the amount returnable for the silver delivered in accordance herewith shall be an amount equal to 50+ .– a fine troy ounce, which amount is not less than the fair value, at the time of this order, of the silver required to be delivered hereunder as determined by the market price over a reasonable period terminating at the time of this order.

      Section 5. Reimbursement of costs..–The Secretary of the Treasury shall pay all necessary costs, actually incurred, of the transportation of such silver and standard silver dollars, silver certificates, and other coin or currency of the United States, including the cost of insurance, protection, and such other incidental costs as may be reasonably necessary. Persons desiring reimbursement of such costs shall submit their accounts on voucher forms which may be obtained by writing to the Treasurer of the United States, Washington, D.C.

      Section 6. Licenses..–The Secretary of the Treasury, subject to such regulations as he may prescribe, acting directly or through such agency or agencies as he may designate, shall issue licenses authorizing the withholding of silver which the Secretary of the Treasury, or such agency as he may designate, is satisfied

      (a) is required for legitimate and customary use in industry, profession, or art by a person regularly engaged in such industry, profession, or art or in the business of processing silver or furnishing silver therefor;

      (b) has been imported for reexport; or

      (c) is required to fulfill an obligation to deliver silver in such amount to a third person, incurred or assumed by the applicant on or before the effective date of this order; Provided, That at the date of the application, the applicant owns such silver or holds the obligation of another to deliver to him such silver.

      The Secretary of the Treasury may, with the approval of the President, issue licenses authorizing the withholding of silver for purposes deemed to be in the public interest and not inconsistent with the purposes of the Silver Purchase Act of 1934 and of this order.

      Section 7. Deliveries in fulfillment of obligations or to licensees.–No person required to deliver silver owned by him or in his possession or control shall be deemed to have failed to comply with the provisions of this order, if such silver is delivered in fulfillment of an obligation incurred or assumed by such person on or before the effective date of this order or is delivered to a person licensed to acquire and withhold silver in such an amount under Section 6. . . .

      Franklin D. Roosevelt, Executive Order 6814—Requiring the Delivery of All Silver to the United States for Coinage Online by Gerhard Peters and John T. Woolley, The American Presidency Project

      • I’d never accuse you of lying, George. I guess because we had silver coinage up until 69 it wasn’t as sever a blow as the loss of the gold coins we never saw again.

        Thanks for the edumacashun. That’s why I stick around.

      • Hi George
        At first glance it looks like a 61 8/25 percent tax for seigniorage brassage and coinage: except there is a confusing statement that suggests the calculation of 50 + a fine Troy ounce. Did the US government pay $0.6797 per Troy ounce or did the calculation make it $0.6797. + 0.50 = $1.797.

        Honestly if the government was paying $ 1.79 per ounce in 1934 for silver I would run to the bank to sell it to them. If they were paying 67 cents I would feel ripped off.

      • Right, Remind Us, ’64 saw the last of the 90%ers for common circulation. Why the government allowed for the 40% half dollars to continue was probably just for, heck, I dunno, sentimental reasons? I do remember seeing TV news spots describing the “sandwich coins” but, at 7 years old, I had no sense of economics beyond the fact I had housing, clothes, food and toys. How much everything cost was not my concern at the time. I have asked the previous generation of my family why they didn’t save the silver coinage but it was always met with a shrug. Obviously no one was thinking about inflation at that time and very few actually knew its source. My paternal grandmother, however, did and was always saving silver dimes for us, but, like all generations immediately succeeding a previous one the old generation’s ideas are always outdated and, therefore, useless. Who knew the need for currency that had real, intrinsic value would ever come ’round again in our lifetimes?

        Thanks for the article reference. One of my hopes is we, the whole U.S., comes to realize just how much of an absolute b*****d Johnson was and what he did to our nation. As a born-and-bred Texan he is a true embarrassment to me. Perhaps all the presidential libraries will one day be turned into educational institutions of how NOT to run a country.

  2. And with the publishing of the freshmen congresscritters words this morning the only thing that sticks in my mind is what’s been said here many times in the past – “Idiocracy”, the movie, was really a prophecy.

  3. I fail to see the logic of the last line regarding warriors. There’s a difference between starting a conflict and holding the line. Someone who refuses to allow theft or invasion is stalwart, though not necessarily a warrior, regardless of what he may do to stand his ground and protect what needs protecting.

    I don’t consider honest police and border patrol warriors, regardless of what they may do to interlopers. Soldiers, on the other hand, are trained to invade and control foreign territory, along with securing our own borders if necessary. IMHO, the difference is one of aggression against something you don’t rightly own or have legitimate obligations to protect.

    Shooting an invader in your house is not the act of a warrior. It’s simply protecting yourself, your stuff, and those you care for.

    • Courtesy of Mirriam-Webster online:
      warrior noun, often attributive
      war·?rior | \?w?r-y?r,
      ?w?r-?-?r, ?wär-?- also ?wär-y?r\

      Definitions of warrior:

      – a person engaged or experienced in warfare broadly : a person engaged in some struggle or conflict // poverty warriors
      – a person who fights in battles and is known for having courage and skill

      • @Warhammer: I looked up the same or similar definition and perhaps we’re stuck on semantics. I don’t consider police and CBP as soldiers(involved in war against a foreign nation). Domestic police actions are not wars, despite the unfortunate naming of “wars” against drugs, sex, crime, unemployment, illiteracy, etc. Police(and CBP) are holding people accountable for crimes or other infractions of law. Soldiers(warriors) are involved in a fight to the death against foreign adversaries, and normal peacetime laws and rules are suspended.

        Any individual can be a hero if that individual rises above serious personal risk and fear to do something that must be done for the good of another. This is true for soldiers, law enforcement officers, and regular non-uniformed people. That was my point, though I may have failed to be sufficiently precise.

    • Lol I love that Steve..I’ll checkout the Windows to see what’s there..
      Reminds me of when we set up a camera using a great lens that was experimental at the time to track the landing of a flight at national airport.just to see what it could do. And got a great shot of the pilot picking his nose lol lol

  4. George, again, an excellent economic analysis. But, would that your ‘political’ focus was not so penny wise (“takers”) and pound foolish ($2 trillion on the national debt for rich guys and their buybacks).

    You’ve got the principle correct: “The dynamic that damn near killed the American economy in the Great Depression was the people lost their incentive to spend money.” Yes, most didn’t have money to spend, and what little was left was preciously horded. Obviously.

    And yet you abide sucking trillions out of the economy into the hands of folks who mostly won’t spend it. Yikes. But at least the Trump cheerleading has stopped.

    Ultimately, it looks to me that we are nearing the end of the Obama boom momentum. It has taken a lot to derail that boom, and now that the Trump deficit sugar stimulus is wearing off, maybe Trump can start his own boom. Or at least just get out of the way! How hard is it to make a couple tweaks with China, declare victory, and get those farmers off welfare? Best, Mike.

    • 4 trillion.. it will grow.. my guess is double next year.. last year the national debt per person was what 45,000.00 right now it is 65,801.00 figuring compounding the interest on interest it wouldn’t surprise me if the per person debt next year would be 131,000.00.. it doesn’t matter who is in office either.. then the feds .. destroying their own product.. hmm.. WHY….
      my guess is they see the spiral went out and borrowed all this money rather than let the correction that should have happened during Jimmys days in office.. tax everyone equally .. so they rode on the backs of the middle class.. today the middle class is pretty much gone.. today we have the two class system.. the haves and the have nots.. this year its one in three on federal programs next year if it keeps excellerating at the rate today it will or should be one in two.. you don’t have to be the smartest bulb in the box to see this..

  5. “People loose the incentive to spend”

    in my honest opinion it was a spiral.. similar to that going on today.. People borrowed money to invest and spend.. then there was the dirty thirties drought.. and an interesting book.. or article depending on how you look at it.. at cambridge the increase in prices.. the book I believe is this one.. which this one is a good book if it isn’t the one that comes to mind.. Why Did Prices Rise in the 1930s? by Christina D. Romer
    That brought up this year and the increases we have seen.. this year basic necessities increased their prices before spring. you can charge whatever you want for a product.. doesn’t make any difference if a ten dollar item is now a hundred that I have to have just means that if my income didn’t go up that much that I will cut spending someplace else to make up for its increased cost. I have never seen them do a major increase like that this early or late in the year.. usually they come right about tax time or shortly after tax time.. this year they started in October..Income didn’t increase.. even the people I know at the hospital said they hadn’t gotten a wage increase this year..Christmas Bonuses are only for management. My son in law that is an executive didn’t get a bonus this year either.. which says a lot..
    companies have outsourced jobs so the local economy suffers when money is shipped out of the area.
    gold.. well gold to me is worthless..

    interesting and scary times are ahead especially for those of us at the bottom..

  6. “sharing that which we create is at our discretion. It comes not at the whim nor demands of takers.”

    Hmm. Tell that to the pupetteers.
    some years ago I had coffee with a gentleman that over heard a conversation I was having about what I seen headed our way. He was a planning official on how to prepare for emergency preparedness..
    Anyway he had lists of resources that the general public had available.
    Companies, finances ,goods labor..
    In the event of a national emergency what you have own or run is available to be acquired at their discretion.

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