Socionomics Alert: Change in Energy

Mike Cernovich: The Energy has Shifted

Several high consciousness people I’ve spoken to independently told me they felt a shift in energy. Something is going on. This feeling happened 2-3 weeks ago, and it wasn’t about politics or elections. The feeling is much bigger. There has been an energy shift.

Whenever you talk about Energy, haters appear. “It’s woo-woo,” but this only shows they are morons. You see Energy measured every day, though it’s wrapped up in terms like consumer confidence, inflation, and bubbles.

Keynes called this Energy the “animal spirits,” or animating force of human behavior. We all know Energy when we see it.

What could he be talking about? People are talking about this post online (such as the Buzzfeed editor-in-chief), indicating they know what he's talking about even if they don't really "know."

At the start of the year I posted: 2018: The Pivot Year and after the first crack on February 5 I posted: 2018 Pivot Year: Here Comes the Pivot

On the other side, Chinese growth is slowing and they recently eliminated tariffs on steel exports. Tensions in North Korea aren't improving U.S.-China relations. One way or another, I expect action on trade in 2018.

Finally, the overall trend in social mood remains negative. I believe this is a higher order decline as in the 1930s, and thus dollar positive (deflation) rather than a correction and inflationary (1970s).

As I said above, I could be wrong. And the best case for my being wrong is still the commodities markets. Several funds such as steel, copper and coal (and related emerging market countries reliant on natural resource exports) are on the verge of breakouts. I expect China to slow, but FXI recently broke out above its resistance again and opened up 3 percent on Tuesday.

The big questions are still interest rates, inflation expectations, credit growth, China and commodities. There are some signs of an uptick in lending (see TOTLL and BUSLOANS at Fred), but still well growth rates in 2016, let alone during the pre-2008 expansion. The strongest argument for stagflation is the traders who are seeing a bearish move in bonds, not in the economic data. The commodities impulse appears to be ending. Tariffs and sacntions are bumping prices up, but it won't lead to a price spiral without rising credit growth or a decline in the dollar, both of which can accompany a recession/depression.

Some charts below have broken out, others are on the cusp or threatening reversals. A couple charts at the bottom show how technology looks stretched and do for some relative mean reversion, one way or another.

I'll post a lot of charts below, but for the short-term I want to show the BofA high-yield option adjusted spread. The collapse in the spread over the past three weeks was extremely fast, at least in high-yield credit investors quickly returned to total complacency.

What follows are a lot of charts that I posted earlier this year. The stock market topping chart I posted on February 3: End of Rally or End of Bull: Is It 1987, 1994, 1997, 1998, 2000, 2007 or 2014? If you believe the stock market is topping and you expect interest rates will breakout to the upside, then the decline in stocks will be far larger than a normal bear market. If the 30-year yield rises to around 4 percent and the Dow Industrials/30-year Treasury falls to 130, the Dow would be at 15,600, 37 percent below today's price. A move to 5 percent on the 30-year would give a downside target of 50 percent for the DJIA.