We have an idea what to expect in coming years, thanks to the presidency of Herbert Hoover.  Oftentimes, we have drawn parallels between Donald Trump and Hoover – because both face transitions from runaway serial bubbles to “normalcy” – and the transitions include long wave economic cycle lows.

We are likely, in my view, just coming to the (delayed) Hooverian Transit.

The “transit” is the danger period when long-term interest rates begin to rise while the economy is too fragile to absorb any additional debt.  Like now.

(Continues below)

 

In fact, the Trump administration’s marketing of a “tax reduction” is completely wrong, as we read it, since whatever “breaks” will come at the higher price of future inflation.

Authoritatively, we read in the Library of Economics and Liberty here that Hoover was – in many ways – bent on promoting a strong economic continuance of expansion in the face of the Crash of 1929 and thereafter:

“Hoover did not stand idly by after the depression began. To fight the rapidly worsening depression, Hoover extended the size and scope of the federal government in six major areas: (1) federal spending, (2) agriculture, (3) wage policy, (4) immigration, (5) international trade, and (6) tax policy.”

Thus, we are already seeing what may be the modern analogs to Hoover’s policies.

Trump speaks of containing federal spending, supporting farmers, wants great wages to accompany his “Great Again” policies, it hard on immigration, he’s a fair trade, not free trader, and his tax policy – like Reagans – is based on the prospect of luck rather than the formulaic outcome of delayed but higher inflation to come based on the emerging pseudo-science of financial engineering.

I call it “pseudo” because financial engineering comes with an unnamed co-conspirator in the shadows:  Social Engineering.

Unlike the 1930’s, however, our coming Troubles will not have such easy outcomes as jumping in to World War II and pulling out a win for the “good guys.”

The key difference between then and now is resources.  In the Great Depression, capital could snap up whatever was needed or desired on the cheap.  In today’s world, however, resources are zealously owned by others who have used the past century to become rather skilled at playing high bidders against one-another.

Rare Earth metals, for example, have been one of China’s long-term plays.

A few headlines to make the point:

The Wall St. Journal reported in 2011 that “China Moves to Strengthen Grip Over Supply of Rare-Earth Metals.”

A few years later (2014), Reuters warned “China stockpiling strategic industrial metals – sources.”

Sadly, it took until March 2017 for House Resolution 1407 to be introduced:

SECTION 1. Short title.

This Act may be cited as the “Materials Essential To American Leadership and Security Act” or the “METALS Act”.

SEC. 2. Sense of Congress on domestic production of rare earth elements.”

Still, the bill (republican Duncan Hunter of CA’s effort) sits in committee while congress does what it does best:  Nothing.

Meantime, MIT offers the notion that recycling could improve the supply picture, but sadly, such efforts involve long lead times and lots of energy.

When the major downturn comes following the present blow-off, we may see major dips in strategic metals, but although it might seem like a buying opportunity, another problem is out there in the future:  Will the “holders of the commodities” stand good for delivery?

Way back when, the Russian grain deal of the 1970s was an interesting spin on the notion of stockpiling:

“This event was referred to in U.S. media of the time as “The Russian Wheat Deal” or “The Soviet Wheat Deal”.[4][5][6] The term Great Grain Robbery is a pun referring to the “Great Train Robbery“. Author Martha Hamilton introduced the term as the title of Chapter VII of her book The Great American Grain Robbery & Other Tales, as part of an allegation that the U.S. government was robbing American taxpayers in order to support grain trading companies.[1] The terms Russian wheat deal and Soviet wheat deal fell into disuse since the sales included corn, barley and oats as well as wheat.”

But there was another side to this story, told to me by a former grain trader (Swiss) who worked for one of the major American companies, when I was living in the Cayman Islands.

As he explained it to me, the untold side was that a lot of American grain in the period was old, bottom of the elevator stuff.  Had the grain sales to Russia not happened, the grain would have spoiled (it was already losing nutritional value) and so the Grain Robbery story wasn’t quite accurate.

In economic terms, it did reduce the US holdings going forward, a bit.  But at the same time, it allowed Russians to eat better and become more economically involved with the West.  Remember than we were, at the time, just 10-years after the global nuclear war near-miss (the Cuban Missile Crisis), this might not have been a bad thing.

Still, the critical difference is that metals, unlike perishables like wheat, will be a different “deal” when pushkin comes to shove.

And with global war still on the menu for the 2024 area (plus or minus NorKNukes and the gunpoint re-unification of Taiwan), stockpiling of strategic materials will be something to keep an eye on in the headlines and your awareness.

It’s sure to mean more than Hollywood losers or clumsy former secretaries of state.

Ure’s Three-Minute Bitcoin Chart School

One of our Peoplenomics.com subscribers asked if we could do a bit more explanation of charting techniques we use because it would help him to track things like our Bitcoin forecasts.

Going “one better” we’re writing a whole Peoplenomics User’s Manual.  But in the meantime, I thought you might find the world’s shortest charting course of interest.

So let’s look at Bitcoin using the chart from www.bitcoincharts.com which is an excellent source.

This chart is then imported into a reasonable graphics processor (we use Corel CorelDRAW Home & Student Suite X8 which runs about $100).

Look at the following chart while I run you through the steps

To the right of “a” I have drawn a circle.  This is our starting point.  Then I look up and to the right and see another spike down at “b.”  This is also circled.

Now a draw a solid line from the lowest point of “a” to the lowest part of “b” and extend each line a fair bit either direction.

This is what I think of as the “lower price channel.”  If the price of something (Bitcoins, an ETF, or whatever, drops below this, I blow out of any long-side position.

Next, I copy this line and place it at the very first high spike.  In this case, the line is copied to (just right of) 1.

Now you label 2 as where the line touches the lower trend channel.  3 is where the price goes up and touches the upper trend channel.  4  comes down to the bottom of the trend channel.

Oh…we’re in 5 right now.

There’s a ton more to it, but there are 5 waves (called Elliott waves) and the outcome is usually that when 5 completes the basic rule requirements for Elliott (where wave 5 must be larger than wave 1 – which it is now) then you can collapse in a heap any old time.

EXCEPT I don’t think it will be today.  There’s still options expiration to come Thursday and Friday…

Think of this as a “freebie” for subscribing to Peoplenomics.

To learn more, get your head out of your icons and read Trading the Regression Channel: Defining and Predicting Stock Price Trends by Gilbert Raff.

I’ve been amazed by the number of people who complain ab out being poor who then promptly sit on their ass and do nothing about it.  Golly….what a crock!

Import/Export Prices

Just out from the Labor Department:

U.S. import prices increased 0.7 percent in September, the U.S. Bureau of Labor Statistics reported today,
after advancing 0.6 percent in August. The price index for U.S. exports rose 0.8 percent in September, after
increasing 0.7 percent the previous month.

Hurricane Harvey and Irma: Hurricanes Harvey and Irma had a small impact on the collection of the
import and export price index data for September, but no change in the estimation procedures. For more
information on the impact, please see https://www.bls.gov/bls/hurricanes-harvey-irma-maria.htm.

Imports

All Imports: Import prices rose 0.7 percent in September, the largest monthly rise since an increase of 0.7
percent in June 2016. The last time import prices advanced by more than 0.7 percent was a 1.2-percent
increase in May 2016. Higher prices for both fuel and nonfuel imports contributed to the overall rise in
import prices for September. Prices for U.S. imports also increased on a 12-month basis, advancing 2.7
percent.

Exports

All Exports: U.S. export prices rose 0.8 percent in September following a 0.7-percent increase in August.
The September advance was the largest monthly rise since an increase of 0.8 percent in June 2016. The last
time the index increased by more than 0.8 percent was a 1.1-percent advance in May 2016. Prices for
exports rose 2.9 percent over the past year. The September advance was driven by rising prices for
nonagricultural commodities; agricultural export prices decreased in September.

Meanwhile, China factories grapple with soaring prices as pollution crackdown bites/

We also have the Fed Industrial Production and Utilization report coming up at 9:15 AM Eastern.  Click here, after that, and then check Futures for reaction.

Harvey Doesn’t Matter

Here’s a snip from Google Trends:  Search Results of Weinstein over the past 7-days:

Thanks to Google Trends (here), we can unabashedly say “People don’t give a shit about Harvey anymore so can we move on to real news now, please?”

Ah, but as usual, the agenda-driven media are selling history, not news.

This is News?

Jane Fonda says she’s not proud of America.

OK, leave!  I’ll chip in for part of the airfare…(must stay gone, shut up, and other restrictions apply)

Equally Rich

John McCain Slams ‘Half-Baked, Spurious Nationalism’ in Liberty Medal Acceptance Speech.

Handing McCain the award?  Dem Joe Biden.  Network meeting, perhaps.  Charades, anyone?

Embeds

No, we didn’t make it up: Federal government workers donating overwhelmingly to Democrats.

Market Rally?

Deal time? U.S. Not Ruling Out Direct Talks with North Korea, Officials Say.

If this get’s legs, market goes higher….

Still with gold, the IXIC and the S&P futures lower, this could be a Dow “paint the tape” day…

Corrections

Yes, we make errors.  And resorting to drag and drop editing may be one of them.  Here’s how Monday’s column should have read:

Oil rig explosion rocks Kenner, injures 7 people Sunday.

Death Toll From Somali Explosions Tops 300. Please note that The Network doesn’t seem to want the mainstream brain-washers to remind you that this is yet-another dirty deed of an Islamic terrorist organization.

Thanks to the sharp-eyed reader who dinged us on the error.  We make enough of them that it could be a full-time career, but the pay sucks.

Site Security

One other housekeeping note:  A new change in how browsers operate may result in a security warning about Urban.  That’s because of a full-court press to make all website content SSL based (secure socket layer).

Without going into the froo-frah detail, we will be rolling over to https:// for everything in due course.  It’s a fair bit of work, but we will get there.  Lots of site will be making the transition…

Why Reagan Tax Cuts Won’t Work Now
Coping: Mailbag and Aging Notes