Kicking the can on inflation

I recently wrote about rising interest rates ahead, with unpredictable results on world currencies.
People may start to run to variety of wealth preservation schemes as the USD valuation starts to come under assault.   One of those stops will be precious metals / hard assets but this won't last.
The final end game has to be a new paradigm as technology has broken everything else in the wealth storage game.  Some sort of crypto type thing will be the answer, in my 2011 post "Ideal form of Money - Power to the People."


The question is however, why will there be inflation?  We are producing more than ever, at a lower cost, and people simply do not have the disposable income they did 40 years ago.

So if we are under-employed, with lower disposable income, inflation should be impossible!

One of the slight of hands in economic classes is they use 1 word to describe an effect (inflation) and simplify the root cause as one thing.

What we have seen the last 20 years is a variety of efforts to kick the can in rising costs on natural resources.  If we took on renewable energies aggressively, what I am about to describe would be much less of an issue.  However, USA thinks pressing on with solid fuels is the answer, and we will have to learn the hard way.

I wrote previously about peak oil, and how it was real.......until fracking emerged as acceptable.  Fracking did in fact kick that can, NICELY!   But the long term low-cost viability on fracking over a decade is much worse than traditional oil drilling.  The net means we will run through the 'cheap and plentiful' fracking sites quickly.  Once we exhaust the can-kicking option fracking will enable oil to get more expensive per barrel.

More expensive oil will force all costs to rise, and some cost (like shipping) could really accelerate those costs.  But fear not! Before fracking we dreamed up Ethanol as a way to kick the can!  What this gimmick did is set a floor for ALL FOOD must cost MORE than the profit of selling Ethanol as a fuel source.   Which means when oil prices rise, we will plant more Corn to make Ethanol, which will cause other crops to become more expensive as they must be equally profitable as Ethanol!

Unfortunately, in 2018 we are about to unleash yet another reason to force food prices to soar.  Marijuana is threatening to become legal.  Once it does, USA farmers will have yet another crop that maybe more profitable than food, Marijuana.   So food prices must be equal to profit of Ethanol and Marijuana.

Technology is advancing with vertical farming, but that in itself is more expensive than farming.  The good news is it will help put a ceiling (but lagged) on food prices.

Americans will see accelerated costs in food, energy, debt payments (interest rates), and falling house equity.
If only we could have seen this coming back in 2008 financial crisis, the world could have avoided these energy shell games.
Time to get this party started!

Heart of finance just had its first scare in 30 years

I wrote a few times back in January 2009 that the REAL crisis is not the stock market, but risk to Bond interest rates.  Then I wrote post in 2010 "Bonds, Cost of borrowing the heart of all finance" calling out when US 30 year bonds interest rates go above 30 year downtrend, we will enter a new world not since the 1970's, a rising cost to borrow.

Well, we finally broke this recently, as graph below shows:

Our economic model is based on debt, and for 30 years businesses and people could borrow and expect LOWER payments 2, 10, 20 years later.  In 2018, this expectation has shifted to higher rates for decades ahead.

I expect in the year ahead a new world financial crisis to start to emerge, as the debt based society can no longer 'roll debt forward' with lower costs.   I also expect FINALLY the Precious metal sector to get a boost, now that bitcoin has taken it on the chin.   I do expect however when precious metals soar, when they break, the action for rest of my life will be in the cryptocurrencies.   I do think precious metals have one more act in them before being retired from the global economy as nothing more than expensive rocks.

I expect USD valuation is where it will get strange, as our global economy has always judged health of fiat currency against other fiat currencies.    If I am right about interest rates, and fiat currencies are the main value store for next 30 years, then I would expect USD to keep rising and rates must rise to 'break the fever" of USD trading higher, like Volcker DOUBLED US interest rates overnight in March 1980 from 10% to 20%, producing the extreme graphs above and below.

Imagine today, with so many Americans citizens and companies rolling forward debt dependant on the kindness of 30 years of lower rates experiencing such a spike in rates!
.

I am making NO predictions except one, what the world knows as the 'right and wrong' things to do in the financial markets since 1982 is out the window.   Companies that have been stable for decades may wake up in deep trouble in the year or two ahead.   While we can have issues sooner, I expect this party to get start really cooking in the year 2020, USA next presidential election.

In the near term, I am watching a 2 year and a long term indicator for the world markets to enter a bear market.   Things look like a double top and we are about to hear the Bear roar.  But until the charting has confirmation, act with caution for a Bull or a Bear.  The 2 year indicator will mature October 31st, so clarity should come in late 2018.

See NEW related post on inflation.

Good luck!
Keep eye on GDX, GDXJ, and new markets such as 'Alternative Crop' stocks!

Market Rumblings

Below is a snippet from the weekend report of " https://www.technicalindicatorindex.com/ "
Consider a subscription for yourself.

Here is what they had to say.

The Bottom Line from Today’s Market Action: Something is up. Something big is coming. We cannot be sure precisely when or what, but there are warnings from the technical indicators and patterns from the market this weekend that tell us the stock market is in an extremely dangerous place. Caution is warranted. 

We look for the Plunge Protection Team to be active at this time. Whether they succeed or not is to be determined. Stocks were flat Friday, September 14th. The stock market generated its 11th Hindenburg Omen observation Friday for the official H.O. from August, and has now triggered 9 H.O. observations in consecutive days. This has not happened in the past 40 years we have tracked Hindenburg Omens. This tells us the market is in an extreme unhealthy condition, is fragile, and could plunge given a trigger event. 

This does not mean a plunge is coming for certain, however every stock market crash (declines greater than 15 percent) over the past 40 years have been preceded by a Hindenburg Omen. There are large and growing Bearish divergences evident this weekend between the major U.S. stock averages and their 10 day average Advance/Decline Line Indicators, their Demand Power measures, and there is a Bearish divergence between the S&P 500 and our intermediate term Secondary Trend Indicator. 

Rising Bearish Wedge patterns are completing in the major averages. Downside price targets suggest a plunge will follow. We show charts for all of these patterns in this report. 

Bear Market waking up

I put a panic alert out in March, then went positive in May.

Today unemployment numbers was released.  The headline shows 'steady as it goes', about same as past, 200K positive job growth.  But like most things, the details is in the 'fake news'.  The unemployment shows over 2 million people dropped out of the labor force for this report.  The assertion is 2 million people retired or gave up looking for work since the last unemployment report.  Considering currently we have only 58% of the population 'employable', we lost 1.5% of the work force this period.   The recorded job loss was 1.46 million jobs.  When you have 2 million drop out of the work force, we have a NET positive job growth.

If you believe above is fake news please stop reading.  If there is pause for concern, read on.

Being generous and using seasonally adjusted numbers this is the WORST report since January of 1999 , with 423,000 jobs lost.

Combine this with the trade wars starting, and the indicators I follow show a potential market trend change below.

I am putting on the caution warning for the markets, with unconfirmed price action for this being the next new recession starting.

I cut my investments by 40% today.

What makes me very concerned is interest rates are still VERY low, and with corporate tax cuts corporations pulled their cash from over-seas in record amounts with executives dumping shares.  If there is a downturn in the market, I have a hard time seeing what is the easy stimulus plan.

Positive outlook

Back in January, the trend indicator went negative first time in a while.  The indicators have been flip flopping ever since.  On May 11th, all trend indicators are pointing up!   The next expected challenge to this trend  is in August-September, about then the 1 year indicator anniversary is up, and closing in on the 2 year trend indicator.

It is possible to change sooner, if we do, that will be called a failed cycle, and it will be much more dramatic than January if that was to occur.  Swing back here in August for an update, or sooner if we have a failed cycle.

I may not be diligent on updating when this trend changes, so consider subscribing to the service yourself.  

https://www.technicalindicatorindex.com/

Good Luck!

Market Direction Change

I been emailing friends on the market since Feb 2nd, the upshot is we likely formed a top for the next 3 months, and very possibly a year out.  Unfortunately the year out part isn't clear yet.

I subscribe to two services, https://chartfreak.com/, which focuses on individual stocks and https://www.technicalindicatorindex.com/ , which covers macro trends of the market.

the screenshots below are from them, its a paid service, so I don't share the information except when I see extreme moments in time like we may be in now.

The ultimate confirmation will be when this indicator flips
http://websurfinmurf.blogspot.com/2015/10/long-term-investment-trading-signal.html
Food for thought on Market fall predictions using Fed Funds Rate
https://www.themaven.net/mishtalk/economics/chart-predicts-every-market-crash-in-history-ZQD5lS5qnEa6x0Yf0_UGWw


So lets recap!

Feb 2nd

Friends,

I subscribe to a market analyst that generated indicators of a down market for next 14 days, 30 days, and potentially for months.

Please see below the summary.

Unfortunately for me, I didn't check this earlier, I would have exited on 31st.

I'll keep SOME shares of most positions as a "reminder" of my exit position, and to watch in event this trend changes to re-establish.

Also for some precious metal miners I may keep a higher percent.

So while I am not panicking, I am taking serious this new sell signal after a parabolic run up.

Feb 11th

Friends,

The same indicators indicating Jan 30th time to exit the market, is now showing a counter-rally starting Monday.

Their prediction is we fail around the previous high (just short, or somewhat higher), then resume downtrend.

So if you wanted in, or didnt get out, we had a healthy sell off that may provide some cover for getting into or out of the market.

Unless I email otherwise, assume sentiment is ultimate failure for a confirmed  bear market to begin.  Could be a couple of weeks or later this year before the down trend breaks below here.

As for me, I will keep it short-term trading, no big position long-term holds.

Good Luck!

March 1st

Market is looking weak, the counter-rally from the initial drop may be over.

One more signal to trip to confirm reversal to next leg lower

March 2nd

Confirmation today.

I won't bother updating anyone again until I see the Purchasing Power/30 day/14 day/ and 1-3 month turn green.

My main concern was the parabolic swing up we would see would burst, and it did late January.

The counter-rally was a great time to get out or take a chance of this thing turning around.

At this point, unless I see all green, I am assuming we saw a 1+ year top.

Good luck!

2018 New Year - Looking Behind and Ahead

I wanted to take a moment to post some thoughts.
Looking across the economic board, we are in for another banner year in 2018, there is nothing holding the market back, the sky is the limit!
Honestly, I can't post any reason why we dont just double from here.  And thats the issue, when a 'critic' can't show you why we can't retreat chances are, something is a foot.

There is one issue, and I posted this back in 2010, and that is interest rates.

Yes! boring old interest rates, who cares when we have so many places to invest!
The issue is the world monetary system is built upon a debt-system, and when rates go up, we can have issues.

Further, with the new tax cuts and technology advances, I expect more gaps in the poor vs wealthy in America.  the middle class has been beaten, kicked, and next routed.  Maybe with our current president the populous will accept the new reality over the next 3 years.  It could be as simple as having the 'right communicator' in charge to push the haves into the next level of wealth.

So lets take a look, first at my concerns, then the rest.  Really, its hard to see anything of real concern at all.

First up is long term stock indicator I have posted, the overall stock market is set to GREEN!
If the lines cross, time to be cautious.

How about interest rates?  when the lines cross, time to get concerned.

Next up is US Debt.  While Debt isn't NEARLY as bad as media an politicians make it to be, it can become an issue if the work perception turns on USA.  Notice the Bush crash ballooned the debt to 75% before Obama and Obama took 2 more years before the debt jumping slowed.

Clinton debt went down, all others up!

Since Debt really isnt a forefront issue, lets move to one that is, Energy.
If USA charges ahead to reduce dependence on Oil, this won't be as big a deal, but current administration may be hellbent on keeping America dependant on Oil.
And currently, even if the administration wants to get off Oil, we are far from it, so Oil price must be under control.

Bitcoin is all the rage, and I am playing with MGTI (bitcoin stock) and Marijuana stocks.
How is my old axe I grind since 2009, gold miners?  Really hate these things, but there seems to be some life ahead.

Then there is a few of the other sectors to look at.

So there ya have it.  Sky is the limit, all is great until it isn't.  I like Marijuana stocks and bitcoin stocks/  Keeping an eye on interest rates, food costs, Oil costs, USD value, and China's health.  If china breaks out of the trend line upwards, we should have a nice ride.