Author Topic: US Economy and Markets  (Read 323 times)

Offline james03

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US Economy and Markets
« on: May 10, 2022, 09:37:35 AM »
Stagflation.  The economy looks really bad.

In markets, we're due for a relief rally.  However, we just completed what's called a head-and-shoulders, which puts the first target around 3250 on the S&P.  And previous lows are around 2200.  On top of that the Fed is (correctly) tightening, which means stocks down.  The old saying "don't fight the Fed" is a good rule to follow.  Eventually after a debt blow up starts kicking in, and interest payments of governments soar, the Fed will ease.  I don't think the Fed can get to 2%, which is a joke.  Anyhow, the strategy remains the same, raise cash and find solid dividend stocks that you want to pick up at deep discounts, and be patient.

Dollar should continue to do well against the Euro.  Gold actually is not looking like a buy until the Fed eases.  Ruble should continue to strengthen.

The economy is getting hit by the deep debt levels of the corporations, which used cheap debt to buy back stocks and siphon billions of real value into the pockets of executives.  On top of that the Biden Administration is going completely nuts on regulations, seriously hurting growth.  Perhaps the Fed can shock the dying US one more time with massive QE (6 mos-1 year out) and get a year or two of "growth", but that would be the last horrah.  Eyes on the Japanese economy, followed by the EU, which is backed into a corner due to Southern Europe and is currently committing suicide with sky high energy costs.  Eventually the US will follow Japan into a government debt default.  Then starts the zombie apocalypse when the checks get cut off.  Already government checks are not going as far as the Bidenflation continues.  The matriarchy may respond with more government loot, but that just makes the debt situation more dire.
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Offline james03

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Re: US Economy and Markets
« Reply #1 on: May 11, 2022, 08:56:55 AM »
Inflation using the revised calc is now 8.3%.  I'll have the number using the 1980 calc when it comes out.  Probably 18%, another all time record.

Crude oil prices have stabilized after the Biden Administration started dumping crude in the market from our emergency reserves.  When they run out, it will be off to the races.  We're good until the Fall.

Big problem is refined products.  Russia supplies about 1 MM bbls. per day to the market, and that has been cut back.  As I wrote previously, I think that will eventually get sorted out as Russian barrels are diverted to China and maybe Japan, and Singapore barrels are diverted to Europe.  They have to get tanker insurance, contracts, payment channels, and hedging sorted out, and get the cargoes scheduled.  Probably well into summer before that stabilizes.

The Fed is backed into a corner.   They have to keep raising until they cause a recession and kill demand.  I don't know how you kill demand for food, but the catastrophic shortage of grain on the market will show up more and more.

But at least we got to post little ukraine flag emojis!
"But he that doth not believe, is already judged: because he believeth not in the name of the only begotten Son of God (Jn 3:18)."

"All sorrow leads to the foot of the Cross.  Weep for your sins."

"Although He should kill me, I will trust in Him"
 

Offline james03

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Re: US Economy and Markets
« Reply #2 on: May 11, 2022, 03:30:06 PM »
Messages truckers received about a week ago.





Maintenance season is over and refineries will be ramping up production.  Still with the Russian diesel barrels off the market, at some point they'll have to give up on Europe and divert US barrels back to the East Coast USA.  The East Coast lost a lot of capacity due to refinery closures in the Philadelphia complex due to environmental tyranny during Obama.  Therefore they had to import waterborne barrels.  That's why they are now exposed.
"But he that doth not believe, is already judged: because he believeth not in the name of the only begotten Son of God (Jn 3:18)."

"All sorrow leads to the foot of the Cross.  Weep for your sins."

"Although He should kill me, I will trust in Him"
 
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Offline james03

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Re: US Economy and Markets
« Reply #3 on: May 18, 2022, 03:13:28 PM »
Shadowstats is out.  Blue line uses 1980 formula for inflation and allows you to compare past values:

"But he that doth not believe, is already judged: because he believeth not in the name of the only begotten Son of God (Jn 3:18)."

"All sorrow leads to the foot of the Cross.  Weep for your sins."

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Offline james03

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Re: US Economy and Markets
« Reply #4 on: May 30, 2022, 01:29:06 PM »
Bump at the request of Dellery.

I'll give my analysis.  Predicting timing is notoriously difficult, and I have memories of a famous bet I made with Greg many years ago.  There's also the case of Japan, which finally appears to be cracking, after decades on monetary craziness.  The US has $30 Trillion in Fed debt, and it now grows at over $1 Trillion per year, which is accelerating.  So the fact that it WILL default is a given.  WHEN that happens can't be predicted as it is based on a loss of confidence.  But here's what I'm seeing:

The relief rally is complete or near complete, and the 3250 target looks viable on the S&P.  At that point we are at risk of an extension down, which would be in the low 2000's.  If that occurs, that will signal the end of Fed tightening and they'll be forced to step in as the alternative would be bank collapses, fund blow ups, and wide spread bankruptcies.

A good go-by number is 2%.  When the Fed gets rates to that level, I'll be very worried.  Right now the Fed is in a tightening cycle, which means dollar strength vs. gold.  In June they end QE (currently they are tapering it off).  There will definitely be another rate hike, likely to 1.5%.  Bottom line is the Fed's actions to fight inflation will result in a recession.  It's going to be a big recession.  The updated GDP for first quarter shows negative 1.5%, a contraction.  Second quarter, ending in June will also show a contraction, which makes a recession official.  So in a few months you are going to see the unemployment, bankruptcies, and serious problems in the housing market.  We will get the demand destruction and relief in prices to a degree.  Fuel prices will drop assuming that Russia keeps supplying energy products.  A physical stoppage of supply will result in economic Armageddon.

On the downside the recession will result in a much bigger US deficit, so US debt levels will race higher.  Thus the Fed will step in with massive QE to soak up the US debt and rescue the bankers.

They'll keep it going for a little longer, but what their reaction will do is start the next Fed cycle (by the way, early on when the Fed starts, the stock market should go up).  So the next inflation wave will be set.  These waves are coming quicker, so maybe they can keep things limping along for 2 years.

Unfortunately with the usurious debt burden still in place, any economic recovery will fuel price increases and the Fed will be in a far worse situation than today.  I think this is their last go at it.  The debt levels will be so huge any tightening will be catastrophic.

Wild card is Europe, which is far worse than the US.  With their sky high energy costs they only have months until a crushing economic implosion.  Those things are contagious and will come to the US.

So my summary:  Short end, we have only months left due to Europe and possible Russian energy disruptions.  Long end, the Fed can keep the US limping along for 3 years, and then it's checkmate due to US debt levels.
"But he that doth not believe, is already judged: because he believeth not in the name of the only begotten Son of God (Jn 3:18)."

"All sorrow leads to the foot of the Cross.  Weep for your sins."

"Although He should kill me, I will trust in Him"
 

Offline james03

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Re: US Economy and Markets
« Reply #5 on: May 31, 2022, 10:55:37 AM »
Meanwhile, in California:



Average price in US by July 4 will certainly exceed $5/gallon.  Europeans think that is cheap.  Note price of diesel.  That has a MAJOR impact on the economy.
"But he that doth not believe, is already judged: because he believeth not in the name of the only begotten Son of God (Jn 3:18)."

"All sorrow leads to the foot of the Cross.  Weep for your sins."

"Although He should kill me, I will trust in Him"
 

Offline Non Nobis

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Re: US Economy and Markets
« Reply #6 on: June 01, 2022, 02:36:15 AM »
Meanwhile, in California:



Average price in US by July 4 will certainly exceed $5/gallon.  Europeans think that is cheap.  Note price of diesel.  That has a MAJOR impact on the economy.

To be fair that picture is of one station in Los Angeles  https://www.foxla.com/news/chevron-responds-la-gas-station-charging-8-a-gallon. California has the worst prices in the country but that.is the worst station of all. The average is.$6.16 as of this article: https://www.yahoo.com/video/california-gas-prices-now-higher-170019066.html.
[Matthew 8:26]  And Jesus saith to them: Why are you fearful, O ye of little faith? Then rising up he commanded the winds, and the sea, and there came a great calm.

[Job  38:1-5]  Then the Lord answered Job out of a whirlwind, and said: [2] Who is this that wrappeth up sentences in unskillful words? [3] Gird up thy loins like a man: I will ask thee, and answer thou me. [4] Where wast thou when I laid up the foundations of the earth? tell me if thou hast understanding. [5] Who hath laid the measures thereof, if thou knowest? or who hath stretched the line upon it?

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Offline King Wenceslas

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Re: US Economy and Markets
« Reply #7 on: June 01, 2022, 12:36:12 PM »
High inflation rate causes the national debt to be effectively decreased.

This will now continue until alot more people are left living on the streets.
 

Offline james03

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Re: US Economy and Markets
« Reply #8 on: June 01, 2022, 12:40:48 PM »
Welfare and unemployment benefits?  Stimulus?  Expect the deficit to be much higher next year.

The Fed's response to high inflation will crash the economy.  Government outlays will increase, tax receipts will tank.
"But he that doth not believe, is already judged: because he believeth not in the name of the only begotten Son of God (Jn 3:18)."

"All sorrow leads to the foot of the Cross.  Weep for your sins."

"Although He should kill me, I will trust in Him"