Finance is part statistics, part floating craps game, part mafiosa, part leap of faith and so on.  When I wrap all of these things up into a spreadsheet (and call ity Golem II, it suggests that the market going forward may work out something like this…

As always, this is not financial advice

What we see, however, is for another couple of months to the downside being possible into as late as spring 2019.  Today, in our modeling – Monday at the latest – we should see something in the way of “surprising news” that will receive “the blame” when the markets go down.  The S&P turning down before the Friday close would be least surprising.  Early futures were +10…but the Dow has been up and down.  And back up./

A few months back, however, we took notice of something described for our subscribers called “heartbeat of the market” and it shows that there may be a semi-regular trading cycle (regimen) being played out in world markets right now.

Nothing would surprise us less to for future financial historians to reveal that a new “global AI trading system” went live around the first of August this year.  In our Heartbeat of the Market work, we could argue that the first two-months of operation of the global financial AI were devoted to “learning” exercises.    Then, concurrent with the nominal market highs around October 3 in our Aggregate work, the new system went on line and started working us down. In a regular way.

Without giving it all away, there is a kind of symmetry to how this postulated AI at work in financial markets would operate.  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.

Which only leaves us with one major ponder of the morning to deal with.

IF (and this a dart toss) this wild speculation about market AI is right, the S&P action today MAY gives us an idea as to timing.

Here’s why…no, on second thought we’ll save that for subscribers.  Let’s just watch and see if the S&P has headed lower by the close today or Monday at the latest.  If we do find ourselves down 100 points (or more) from the present S&P levels by a week from tomorrow.  W’ed press the Scrooge McDuck suit and be dancing in the streets.

Otherwise, this will land where a lot of our wild financial speculations have in the past – on the scrap heap but with some good thinking that might be deployed in other research.

We shall see.  But, it is for sure the kind of thing that results in Brain on Fire and getting up at 3 AM to start filling in spreadsheets on global markets to see how this (hypothetical) AI would play things.  What makes AI so interesting is that while it’s good and fast – and can infer – it is also pattern-bound and that’s what makes financial detective work so enjoyable.

Bonds go up a bit today, stocks notice, bonds go up more, Fed raises, down go stocks… Fed meeting results next Wednesday.

I sure wish the highly regarded professor of forensic economics would drop me a line – I could lay it all out for him and he could turn it into a class project.  Might be fun.

OK, slogging back to Reality (or what passes for it):

Import Costs

Are just out…repeat after me (in hushed tones)  DEFLATION:

U.S. import prices declined 1.6 percent in November, the U.S. Bureau of Labor Statistics reported today, following a 0.5-percent rise the previous month. The November drop was primarily led by lower fuel prices. The price index for U.S. exports fell 0.9 percent in November, after advancing 0.5 percent in October.

Imports Prices for U.S. imports decreased 1.6 percent in November, the largest monthly decline since a 1.8-percent drop in August 2015. Despite the November drop, import prices increased 0.7 percent over the past 12 months, the smallest over-the-year advance since the index increased 0.2 percent from November 2015 to November 2016.

Fuel Imports: Import fuel prices decreased 11.0 percent in November following a 3.2-percent rise the previous month. The November drop was the largest 1-month decline since the index fell 15.6 percent in January 2016. A 12.1-percent decrease in petroleum prices led the November decline in fuel prices and was the largest monthly drop since petroleum prices fell 17.2 percent in January 2016. The November decline in petroleum prices more than offset a 12.8-percent advance in natural gas prices that followed a 22.3-percent increase for that index in October. Despite the decrease in November, fuel prices rose 4.6 percent over the past year. The price index for petroleum increased 4.4 percent for the year ended in November, and natural
gas prices advanced 11.6 percent over the same period.

All Imports Excluding Fuel: Prices for nonfuel imports fell 0.3 percent in November, after ticking up 0.1 percent in October. Lower foods, feeds, and beverages prices were the largest factor for the November
decline in nonfuel prices, although prices for nonfuel industrial supplies and materials and capital goods also decreased. The price index for nonfuel imports increased 0.3 percent over the past 12 months, driven by higher prices for nonfuel industrial supplies and materials; consumer goods; and automotive vehicles.

Nonfuel Industrial Supplies and Materials: Nonfuel industrial supplies and materials prices fell 0.4 percent in November, after recording no change the previous month. The decline was led by a 0.7-percent drop in unfinished metals prices and a 1.4-percent drop in prices for selected building materials.”

Tomorrow, the data flows will be more interesting as the Fed’s Industrial Capacity and Utilization figures come out.  And just before those we’ll have Retail Sales.  This one will be gobs and oodles of fun to watch since the Trumpster has tied his name to the markets so tightly.  We see the market decline as a nifty way for the PTB to attempt to leave DJT holding the bag and at the same time pocket a lot of money from the Peeps.

Retirement Insanity

I was talking to my buddy out in Arizona yesterday and was shocked to here that in their upscale retirement community most homes sold to seniors have a mortgage on ’em.  About 70 percent of them.  The money that could have paid off the homes?  In highly leveraged stock funds.  I shuddered at the report.

Can you imagine?  Work a whole lifetime and STILL have a monthly house note to worry about? OMG, we’re becoming as stupid as the kids.

This conversation led into an elongated discourse asking “Why do the Millennials have such a sense of [financial] entitlement?”  Sadly, the answer (and fault) lies with us oldsters and grays because we didn’t make them work for things when they were young.  Which is how they got to be a whole generation only loosely attached to economic reality.

The whole world’s now in “gimme mode.”  No chance of taxes coming down or deficits being reduced until that spending fever and excess consumption disease – the primary symptom of which is living above your real income – breaks.  Until then?  The American Middle needs to check into rehab.  Need to turn off political audio and sample some financial podcasts.

Market declines (and Greater Depressions) eventually iron out these social shortcomings of our failed parenthoods, though.  Sorry for the pain, but if we’d been more savings and ownership-oriented when younger – and IF we made the kids work their asses off like we did (or the grand parents) then it would be a saner world today.

No point crying over spilt sativa, though, huh?  On to the morning collection of?

Sanity Checks

We have a few cheerleaders for The Republik of Greater Kalifornia who read the site and offer intelligent comments (despite their residency).  To them we offer two ideas: 1) Apple to build new $1 billion campus in Austin.  2)  And oh, yeah, we moved to Texas 15-years before ’em.  We label this thought leading not following.  Go to where the deals are and be there first.

Remember the Peoplenomics discussion about Social Credit versus Credit Scores?  Here’s a data point: China’s auto sales in 2019 to roughly match 2018: industry association.

Fleecing the peeps is a growth business.  You can’t hide from Britain’s ‘Long Ranger’ traffic camera…but we can unplug them…. (ahem…)  Does get to an interesting question:  Is it illegal to unplug an entrapment machine?

The political fog hasn’t lifted.  Tucker Carlson: Democrats say border walls are immoral, don’t work. What about Israel?.  to which, we’d suggest “Ask the Palestinians?”  Still, with a black tar death in our (extended) family that came in through Obama’s “open borders” we were appalled at the ass-covering and “take it behind closed doors” crap spewed by the Peloser this week.  Death in a family due to coyotes and illegals does modify your thinking on “free-for-all” border BS.

Meantime, we see Obama’s ex COS – who was pushing open borders back when NOW has a solution to their policy disaster which has come home to roost.  Chicago Mayor Rahm Emanuel: Legalize pot, open casino to pay down city’s $28B pension debt.  Dandy. Toss in legalized sex workers and swindler licenses while we’re at it?

Reminds me of the old political joke:  A “liberal” is someone who’s never been burglarized or spent a night in jail.  Experience is like the atomic core moderator of Life.  If you don’t have experiences on both sides of an issue – and had to pick one or the other, please just STFU until you can offer experience-based views.  At least Rahm is trying….disfortunately, how-some-ever, random policy application misses the point of holistic governance.

That’s the difference between mee-mee’ing and informed discussion.  Maybe Rahm’s mayoral stretch is his mea culpa….fix the blowback from past policy errors?  Where were we?  Ahhh,…

Goosing someone’s balance sheet, perhaps? Japan Post to invest $2.6 billion in U.S. insurer Aflac.

More foreign investment notes 0- this from our Deutschland uber alles files: Top German court rules Uber limousine service illegal.

Whenever I read a story like “UN-sponsored Yemen talks wrap up in Sweden” I ask myself:  “Why can’t they all save money on travel and do their talks nearer home?”   Spend, spend, spend.  If I were Yemeni I’d be pissed.  Use the money at home, jerks.  Sweden’s got a solid economy and this kind of behavior doesn’t support the local economy and that’s how crooked politics works.  Following the logic?.

Time to count the chickens before they hatch and scramble three…

Moron the ‘morrow…

Markets: Southbound & Down? Plus Retail Data
Social Credit Versus Credit Scores