Random Thoughts

It is said that rate hikes do not help high oil prices. Do rate cuts?

You can't print oil. Aye, and what does currency printing do in this context?

Home prices climbed 42 percent since the pandemic according to Case-Schiller. Home affordability is at all-time lows. Assuming lockdowns damaged the econmoy, why should's prices fall 30 percent back to the pre-covid level?

For 12 years, the Federal Reserve suppressed interest rates and thereby indirectly funneled hundreds of trillions in capital into unsustainable projects and investments. Higher interest rates are the solution, no?

Why shouldn't the strongest companies and countries set their interest rates higher so as to attract scarce capital?

Short-term: if the U.S. dollar is peaking, where do commodity prices go? Inflation? Interest rates? Long-term: same questions, but also what if the dollar hasn't peaked for good yet?

Idiocracy Comes at You Fast

Toronto Sun: British hospitals asking men if they are pregnant before getting scans

The Walton Centre National Health Service Foundation Trust in Liverpool is just one of a handful of National Health Service trusts that asks “all patients under the age of 60, regardless of how you may identify your gender,” the Daily Telegraph reported.

The amendment comes after the NHS was slammed for “prioritizing gender over sex in order to be inclusive of trans people, including on single-sex wards,” according to the paper.

The wife of a cancer patient said the “unfair” question caused “unnecessary confusion and agitation” for her husband, who was already emotional from brain surgery and the steroids in his system.

Would you want to get medical treatment from this facility? Would you trust a doctor that asked this question? I would not.

You might think this is nonsense and doesn't affect your care, but I disagree. A big "red pill" for me was the realization that as society degrades and becomes stupider over time (population IQ is declining via demographic changes), an increasing number of people aren't in on the joke. All of the nonsense ideas from climate hysteria to systemic racism to this gender stupidity started off as fringe ideas that people tolerated as a joke or because it was politically useful. "Let's scare our donors to death to raise money!" is a tactic used by the Southern Poverty Law Center, the ADL, various Green groups, BLM, the Democrat Party, the Republican Party, mainstream media, the CIA, the FBI, defense contractors, pharma companies and so on. There were some Islamic terror attacks after 9/11 in the U.S., but from what I can tell, the share of terror plots created by the FBI and discovered by the FBI crossed sometime around 2010, and since then we've been in a state of manufactured terror. They've run out of Islamists to scam and moved on to the "domestic" terror threat from people who ask about the FBI concocting terror plots...yet it's not clear to me that people who should know it's fake, such as the media and most politicians, know it is fake. They believe it. When your leaders are completely enthralled to false narratives, what hope is there for the wider society? The rot has reached the top. The original cultists died without telling their children not to drink the Kool-aid.

In the case of this "pregnant men" nonsense, the first doctors get it. Maybe they go along with it, or not, but you "know" that they know it's a joke. Men can't get pregnant. Some portion of the public doesn't know though. They don't get it. They do not think independently. Instead, they trust the doctors. There are many doctors and nurses, evidenced clearly during the coronavirus panic, who also do not think independently. They implement policy as dictated from Washington or whatever institution is seen as authoritative in the moment.

We are at the point in decline where you should panic when you hear a doctor ask you a question such as this because it is a very important piece of information telling you, "The lights are on, but nobody is home." Also, many people are confused by it. What is a transgender man? Is it a woman or a man? Medical mistakes are common. A nurse or doctor in an emergency situation could become legitimately confused by a patient. Basic systems are becoming dysfunctional because basic assumptions about reality are being destroyed by a culture imploding into its own footprint. The man who became confused and agitated by the question is sane. The system is insane.

Reject Terrorism

The term terrorism refers to violent act, but in the age of 4G warfare, should it remain limited to physical act? The goal of terrorism is to instill fear via physical acts, but if you can achieve the same effect with psychological warfare, is that not terrorism?

The climate is constantly changing. There are deadly natural events such as earthquakes, volcanoes, tornados and hurricanes. Relabel these events under the banner of "climate change" or "global warming." Implement hare brained economic plans that cause people's living standards to declie. Drive up their cost of energy, limit their physical movement. Declare your political enemies the villains and terrorize the population until they fear Nature and hate their fellow man.

Viruses have probably existed almost as long as life has existed. Seasonal respitory illnesses are common. Long-term effects from the flu are common. Relabel these illnesses as "Covid-19." Implement hare brained policies that destroy the healthcare system. Deny people healthcare when they become sick with these illnesses. Ban all discussion of treatments. Ban the sale of drugs that can fight the illness. If they finally get sick enough to enter the hospital, put them on ventilators that cause pneumonia and kill them. Count the death as having been caused by "Covid-19." Offer experimental "vaccines" that will protect people from the virus. When they become sick from the side effects or die from the shots, count the deaths as having been caused by "Covid-19." Declare your political enemies the villains and terrorize the population until they fear Nature and hate their fellow man.

Political disagreements have always existed. Sometimes mobs of people will go to rallies. Two opposing crowds of sports fans or political parties will occassionally get violent. Relabel this violence as an insurrection, a coup or terrorism. Use this relabeling as justification to ban people off public Internet sites, censor search results, limit discussion of political topics. Limit phsyical movement by placing people on no-fly lists. Force banks to close their bank accounts. Declare your political enemies the villains and terrorize the population until they hate their fellow man.

Across America, there are obese 20-something women with blue hair (or similarly sexually unappeling color) who live in fear of climate change, covid-19 and white nationalism. They are berated by terrorist lies day-in and day-out. The greatest threat to their health and happiness is their weight and choice in hair dye, yet the same regime that terrorizes them with lies about false threats, instead offers them fat acceptance. Fight fat shaming. You be you! Go girl!

Is this the behavior of a Good ruler? Of a ruler who is, as said in Romans 13:1 "appointed by God?" Are they concerned with Man being in harmony with Nature, with preserving the Heavenly order? Do they love and care for the people under their authority, or do they instead behave as if their master is the Devil? Reject Satan, and all his works.

Blogging At Bitpost

I'm blogging everyday over at Bitpost this month. I will continue posting here, but longer pieces will be over there. It is free to read, no signup needed like at Twetch.

Real Estate Update

Rates didn't keep rising and now real estate is coming up on old highs. If a topping process is underway, with Nasdaq perhaps already topped, it's likely REITs could achieve a new all-time highs along with other "defensive" sectors before the broader market finally tops later this year. Not a trade that interests me. In the very short-term, perhaps a test of that resistance.

Castles on the Ground

I posted another discounted stock today. Everything going on in the markets says it has more room to run, but chart screams warning for the whole market:

This reminds me of MicroStrategy, which I posted on two weeks ago. When stocks do nothing for years on end and then start spiking like they did in 2000, or 2008 and 2011, I pay attention. What year is the right analog? Commodities feel more like a 2000 situation because of the bear market, but it's also the case that the anticipated growth is wholly artificial. The bulls like myself expect the government will create demand for low carbon and EV transporation. The Austrian-leaning like myself expect it will end in disaster for the economy. What happened to Texas last week will be replicated worldwide, or there will be debilitating inflation to create effectively zero growth once the inflation is netted out in the eventual deflationary collapse. If for some reason these government plans don't come through, if say, the Republicans sweep Congress in 2022 because inflation becomes a problem far more quickly than expected, the plans will be cut short.

The U.S. economy is "growing" only because of stimulus. There have been no cleansing defaults that reduced the cost of capital. Companies didn't go bankrupt, today owned free and clear by new owners. Instead, small businesses were wiped out by lockdowns. Their defaults are in the future if the economy cannot revert back to "normal." If there is a transition to a new economic pattern, it will come with transitory unemployment and recession.

In short, this is not the start of an economic growth cycle unless there are incredibly inflationary policies. The opening of the economy is assumed. The $1.9 trillion is assumed to hit a normalized economy. The market is not discounting the risk that the economy needs far more than $1.9 trillion in stimulus. It isn't considering the risk that the public revolts again, like in 2016, and chooses not to wreck the economy for a green pipe dream. It isn't discounting the risk on the other side of the ledger, that interest rates rise amid soaring inflation. It seems like many people think the Fed can control the whole yield curve and that markets won't break if they try. As if the dollar or oil, or some other assets, won't trigger a recession. The government, central banks, ruling classes and seemingly most investors are more naive than I've seen at anytime in my life.

Socionomic and Antifragile potpourri

Able to post regularly again, for how long who knows.

Highly recommend Nassim Taleb's Antifragility. I wouldn't describe it as a self-help book, but many of the ideas in the book can be applied to daily life, as well as to business and government and everything in between.

Below is a 1 hour interview with Taleb that is chock full of ideas.


One of the ideas in Antifragility is signal to noise. He uses the example of news, most of it is noise. He says that many days, news should be a couple of lines, and other days it should be pages and pages. In order to fill up time and space, however, news is filled with lots of noise. He gives the example of 1-to-1 signal to noise in one year. That is, you check the major news for the year and half is signal, half is noise. Well, on a daily basis, the signal to noise ratio will be something like 1 to 99.

Back in 2010, I often wrote about the political problems in the EU and the likelihood of a breakup. I have tried to cover major developments such as extreme parties in Greece, Scottish and Catalonian secession movements, but otherwise I view these stories as confirming the signal. Unless something changes, I don't feel the need to cover every blip along the trend. Occasionally, I write about it to remind myself or for new readers, but otherwise I'm not interested until the trend changes. EU breakup is still on.

Similarly, I covered Egypt's problems last year. Literally one year ago, I posted: Egypt heading for collapse. I see news such as this: Egypt's protests reveal deficit of trust in Muslim Brotherhood as confirming the socionomic theory and the signal. It wasn't noise. If I'm wrong or something changes, it is worth writing about, otherwise Egypt is still headed for collapse.

Now there is ethnic cleansing in Los Angeles. This is an early stage movement and has major, major implications for American politics because it ties into the secession movement. There could very well be a Mexican secession movement in the Southwest before the South ever gets around to declaring independence. In any event, it is a marker for what is possible as social mood declines, with serious interracial violence in the cards in places such as LA.

Finally, China is enjoying a small bounce in social mood evidences by the stock market rally, but mood remains generally negative. In What Causes Revolutions?, Patrick Chovanec writes:

A surprising number of people in China have been writing and talking about “revolution”. First came word, in November, that China’s new leaders have been advising their colleagues to read Alexis de Tocqueville’s classic book on the French Revolution, L’Ancien Régime et la Révolution (The Old Regime and the Revolution), which subsequently has shot to the top of China’s best seller lists. Just this past week, Chinese scholar Zhao Dinxing, a sociology professor at the University of Chicago, felt the need to publish an article (in Chinese) laying out the reasons China won’t have a revolution (you can read an English summary here). Minxin Pei, on the other hand, thinks it will.

He goes on to quote Richard Pipes:

So, around 1900, we have a mechanically rather than organically structured state that denies the population any voice in government, and yet, at the same time, aspires to the status of a global power. This aspiration compels it to promote industrial development and higher education, which has the inevitable effect of shifting much opinion and the power to make decisions to private citizens. Pre-1905 tsarism thus suffered from an irreconcilable contradiction. A not-insignificant segment of the population received secondary and higher education, acquiring, in the process, Western attitudes, and yet it was treated as being on the same level with the illiterate peasantry, that is, unfit to participate in the affairs of state. Capitalist industrialists and bankers made major decisions affecting the country’s economy and employment, yet had no say in that country’s politics because politics was the monopoly of the bureaucracy …

The result was a situation which Marx had rightly predicted had to arise when the political form — in this case, heavily centralized and static — no longer corresponded to the socio-economic context — increasingly dispersed and dynamic. Such a situation is by its very nature fraught with explosive potential. In 1982 [Pipes writes], when I worked in the National Security Council, I was asked to contribute ideas to a major speech that President Reagan was scheduled to deliver in London. My contribution consisted of a reference to Marx’s dictum that, when there develops a significant disparity between the political form and the socio-economic context, the prospect is revolution. This disparity, however, had now developed in the Soviet Union, not in the capitalist West. President Reagan inserted this thought into his speech, and the reaction in Moscow was one of uncontrolled fury: this, of course, was a language they well understood and interpreted to mean a declaration of political war against the Communist Bloc. Their anger was enhanced by the awareness that the statement was correct, that they were ruling in a manner that did not correspond to either the economic or the cultural level of their population.

Chinese censoring software sweeps financial data

China censors mentions of 6/4 and 1989, especially around the anniversary date, and today the stock market fell 64.89 points, causing posts about it on Weibo to be erased by censors. In the strangest of coincidences, the opening price for the Shanghai Composite was 2346.98. which read backwards is the date, plus 23 for the 23 year anniversary.
China stocks fall bizarre 64.89 points on June 4,'89 anniversary

Coca-Cola splits: what does Coke's chart signal?

One of the most interesting charts to me, in part because I own the stock, is Coca-Cola. Unlike the broader stock market, shares bottomed during the bear market of the early 2000s, and formed a major cup and handle chart since the peak in 1998. The chart is interesting in itself, in what it might mean and also because I'm bearish overall and this chart makes me question my assumptions.

First, the cup-and-handle typically leads to a major rally when the previous peak (the first edge of the cup) is broken. This cup forming phase is a long basing pattern and fits into Elliot Wave theory as a larger order corrective wave 2 or wave 4. Second, the chart shows a different pattern from the broader market.

In trying to think of why Coca-Cola could diverge from the market, or how it could stage a breakout (it must exceed 1998's high of 88.94, a gain of 19% from the current price) when it already has a relatively high P/E of about 20, calls for some explaining. First, I fully accept that KO may not breakout and we could see shares tumble along with the broader market. In the examples below, KO actually lags some strong performance by McDonald's and Nike. Even in this case, however, the fact that these companies did not make new lows in 2008 is interesting and implies strength that is lacking in the broader market.

I have two ideas I'm mulling on Coke and other multinationals: since China's entry into the WTO, emerging markets have made up an increasingly large share of the global economy and U.S. firms that sell globally could decouple from the U.S. market, if the U.S. were to continue its slow growth (taking a long-term view of a decade and more). The performance of some brand name firms suggests this is already happening.

Thinking in negative terms (what would cause KO to breakout when there's no positive reason), another possibility is that we are on the verge of hyperinflation. Gold (precious metals) performs best in hyperinflation, followed by hard assets, real estate and stocks. A company such as Coca-Cola is more than a drink seller, it owns an intangible asset in its brand and if hyperinflation leads to stock buying, the public will probably overload on blue chips.

I believe the economy on the other side of this crisis will increasingly be built upon intangible assets as manufacturing costs decline and software increasingly controls and customizes our experience with products. Imagine a world where the cost of manufacturing drops to zero: what is left is the image, the brand. Apple is perhaps the best example of this today and the performance of major brand names may be evidence that the market recognizes this ongoing shift to an information economy.

Here are some other companies that rely on their global brand name. In comparing them to KO, I'm looking for firms that did not hit a new low in 2008 or 2009; firms making the cut include global brand names such as IBM, McDonald's, Disney, Pepsi and Nike. Two brands that fail to make the cut are Microsoft and General Electric.

Maybe a major deflationary wave will take all of these stocks below their early 2000s lows. One reason many firms may have not hit a new low in 2008 is due to rapid growth during the decade. However, this brings me back to Coca-Cola, which didn't put up massive growth during the 2000s.

I have owned Coca-Cola since 1994 and have no plans to sell.

There she goes...

I didn't think the euro would drop today, but this morning I seriously considered opening a new short position because for the first time in weeks, I was convinved that the larger downward trend would soon resume. I just thought I had some time. Italian politics (Berlusconi out), French politics (austerity plan), italian bond yields, trader sentiment (Tim Knight was losing some confidence again), plus technical signals all were converging as coincident signals.
One thing I always remember is that there are always new opportunities to make money. Preservation of capital is more important than missing a move. And something tells me, there are a lot more downward moves in the euro to come.

Is gold a bubble?

I've noticed two different arguments for why gold is not a bubble. One is that gold is not a bubble because hardly anyone owns physical gold, very few people own mining shares and institutions are under-exposed. Most of these commentators are looking at Western investors, perhaps mainly U.S. Another thing one hears, and which is fully backed by the data, is that the gold market is international and actually driven by Chinese and Indian demand. These two facts are exclusive. Of course U.S. and especially Western markets are wealthy, and if they decide to seriously buy gold, the price will advance strongly. That said, the Western markets may be superfluous. For a long-time the world has watched the U.S. equity and bond markets for signals, but now the time has come to watch Indian and Chinese sentiment on gold. And in China, gold is very bubbly.......although I haven't seen a gold advertising poster in my apartment building for quite a few months.

The Stories Bears Tell

There's no shortage of bearish stories. I briefly mentioned Prechter's take. He sees a multi-year dollar rally and lower prices for just about everything else, including precious metals. His story, and many of the fundamental bear stories, are based on the large debt overhang in the global economy (though this is just a piece of the socionomic argument laid out by Prechter). Anyone predicting lower nominal prices does not expect high inflation in the near term due to debt deflation, but there are bears who expect high inflation to cause nominal price increases, even while causing a loss of value.

Fundamentally based arguments aside, I've come across several technical arguments for a market top. Some of these include a fundamental or socionomic angle.

First up is a David Singer thesis, posted at The Big Picture. He has a chart of the S&P 500 Index along with notes on the number of stocks above their 200-day moving average.

The market continues to go higher and eventually fills the “Lehman gap” up to the high 1100’s, low 1200’s, but that has to be on weakening overall strength and breadth because the market has shot up so insanely already and like I said 457 of 500 are already above their 200 day ma’s. That area is also the neckline that was penetrated long ago and is severe resistance. By that time, the overall rally will be some 85% off the lows and almost everyone will be sure that this is a new bull market. Picture the atmosphere now, but up another 200 points on the S&P. Those 200 points will be the public finally coming back on board as the message that recovery is here gets filtered into everyone’s psyche. As you have noted, the professionals are “all in”. As we move up, the public investor gets in just in time for the market to begin moving lower again in earnest…

See the chart here.

Next up, Tim Knight offers the Arcs of the Covenants. Not as much a thesis as marking a turning point on the chart, to wit:

The head and shoulders pattern we were all obsessed with early in July turned out to be bouncing off arc support as well, yet, as we know, that support was never broken. We are now all the way back to the 50% arc. Given how close we are to my oft-cited 1050 prediction (which I will hasten to add is at the low end of my 1050-1200 range of an ultimate countertrend top), we could be at an interesting inflection point here.

Just for fun, I decided to back far away from the graph and look at the arc extensions. That was just as eye-opening.

At each of the arcs, there's an interesting event. The magenta tint (where the prices cling to the arc fastidiously) shows the kickoff to the secular bull market, which lasted three decades. The arc at the green tint perfectly nails the crash of 1987 (!), and the blue tint kicks off the final parabolic ascent of the tech bubble (the frenetic 1995-2000 period where the angle was sharply higher).

Check out the chart, plus a great "Joe Kennedy Shoeshine Boy" moment.
Joe Saluzzi hits a lot of popular bearish notes in this interview:


Here's a post by someone under the pseudonym "Tyler Durden" on ZeroHedge. (Several contributers use the same pseudonym.) What are the animal spirits saying? Here's the gist:

The current cycle is a complete anomaly relative to past experience. Margin debt balances (current info through June) have increased 8.6% from the lows. But you can see the strength of margin debt growth in prior cycles. Off the charts is the only characterization that fits when comparing this experience to the present. Who knows, maybe margin debt is about to grow parabolically for all we know.

So, the question becomes, when will the true “animal spirits” on Wall Street reveal themselves? It has not happened yet. And that says liquidity and momentum support for the markets is narrow and potentially volatile. Squeezing shorts and running technical stops can work well for a while. But what happens next if animal spirits broadly are not fully engaged? For now, margin debt is telling us animal spirits are very subdued. Very subdued.

(Emphasis mine.)
My interpretation of this last story is that it supports David Singer's theory. Prechter admits he's often early on his calls and there's some corroborating theories here that suggest a possible melt-up before the final meltdown.

Bonus: The original(?) "Tyler Durden" speaking with Pimm Fox of Bloomberg, topic high-frequency trading.

Time for a shopping list?

I put long-bonds into most of my Marketocracy portfolios today, building an initial position. I think they will drop from here, especially with the $104 billion Treasury auction next week—even though the sales are at 2, 5 and 7 years. My belief is that the "green shoots" will stay green and the 200-day moving average will keep the market afloat through the summer, but in the fall, the average will flat-line. From here, the market can afford to drop more than 5 percent below its current level and still stay above its 200-day late into summer (assuming it traded at an average of the current level). A correction between now and then could provide more room by knocking the average lower. I'm not too reliant on the technicals because they can shift; I anticipate the catalyst will be weak economic data. If by September and October we're still seeing anemic data, investors will start losing confidence in the optimistic scenario. The "green shoots" are a theory that need confirmation in the data, without it the theory crumbles. Up through May, I believe we saw a market rebound. Since then, there's been some optimistic buying, and I don't think this has been exhausted. Finally, if you plot 2008 versus 2009, it's eerily similar. We sank early in the year 2008, culminating with the Bear Stearns death in mid-March. This year, the market fell until March 6. Last year, shares rallied into June, with oil and commodities leading the charge. This year, oil is up 100% and the market is in full rally-mode. Last year, Fannie and Freddie caused a mini-panic in mid-July, two weeks after oil had topped and commodities began to decline. If we follow the script, there should be a mini-event sometime around the middle of July, give or take a couple of weeks, then a recovery and another panic in the fall.

I tagged this post as musings because that's all it is. I'm not trading on this, just trying to get a handle on events.