A Short Holiday Week Gives Us Nothing Much

The short holiday (Labor Day) week gave little in the way of interesting price action in the various markets. With that the main stream financial media had to gin up something to catch their customers. Didn't work on this end - but that's no surprise.

Think of the main stream media in the same way you think of the general main stream media and you'll understand why there's nothing they add to our understanding of either the market or the economy. 

Then there was the descent of HHH - Hot, Humid, Hazy - on our neck of the woods. Ugh. When confronted with HHH, one response is "Who wants to work?" or maybe "I'll work, but not hard," or something like that. So was it a slough off week? Nah. We Catholics have this thing about "offering up." So HHH becomes something we can "offer up" to God. 

Why do we do that? Well, there's not a single reason. But a few are: in reparation for our sins; for the souls in Purgatory; a simple and loving gift to our Blessed Savior, Jesus Christ, Who died for our sins so that we might enjoy eternal life in Heaven. The first two are simple. The third a bit more complicated. To really offer HHH as a gift, we need to suffer (not hard to do), and not complain (hard to do). Even better if we actually embrace our suffering (and it's really a stretch to call it "suffering" for the most part, isn't it?), accept it joyfully, and give it with gratitude.

Back to the shortened holiday week and markets, economy, etc.

Nothing offered up of value by the main stream financial media doesn't mean there's not that world of alternative media that many of us have discovered in recent years. While we need to exercise discretion when we find nuggets that seem valuable, we do indeed find such nuggets. And this week, despite the dead main stream financial media blather and HHH, we did indeed find such nuggets. We hope to share the nuggets that are more gem-like in coming posts. We're still digesting at this point.

But here are some nuggets from one of our Brain Trust that you can munch on this week:

 

-   A “silent top” is forming: Big selling occurring in the big cap stocks that propelled the markets.

-   Internals: Declining volume heavily outpacing advancing volume on both NYSE and NASDAQ

-   A brief bounce likely now in small caps, S&P

-   Do not be overexposed in either direction for balance of August

-   Thinks September will reward the Bears

-   Might even hit a new all-time high in one of the major Indices.

-   Signs of distribution continue to accelerate.

-   Do not ignore very negative fundamental issues combine now with bearish technicals.

-   Former leaders of the rally (Apple, Tesla) have endured significant declines (e.g., Apple down 11% August alone).

-   Investors Intelligence shows series of “buying climaxes” (when a stock makes a 12-month high but closes down for the week – a sign of distribution) – highest series in over a year.

-   Unusual: Don’t remember ever seeing/hearing analysts/media urging buying in order not to miss the next Bull Market.

-   Energy Sector best value in the market – But is that enough to keep these up when everything crumbles?

-   Fundamentals: As opposed to the past, these stopped being important after 2007. Now super-fast computers rule.

-   Fed is bankrupt: True if they had to mark-to-market their assets.

-   Other CBs may be even worse.

-   5.5 Trillion in MM Funds: Said to be near-term fuel for Stock Market – But why isn’t money being invested already?

-   Powell says it will take “below normal economic growth: to quell inflation. But a strong economy does not produce inflation. Deficit spending does.

-   Re Fed cutting rates: A cut in rates by CBs is always too late to prevent a stock market plunge; will also be too late to save economy.

-   NB: Biggest declines in the stock market start when the Fed starts lowering interest rates. Lower rates ony have a positive effect in the late stages of a Bear Market – so be patient.

-   Economists will claim declining interest rates will cause inflation to rise – not true. Hiking rates while keeping money available will boost inflation.

-   Re Liquidity and Credit: both are contracting now.

-   Unofficial recession already in progress; official is immediately ahead.

-   LEI has declined for 16 months in a row.

-   Economies worsening: World’s largest economies starting to go into convulsions, with excessive debt being the driving force. Debt only stimulative in early stages. Once that’s exhausted, future demand is not there and significant recessions/depression result.

-   Happening now in Russia, China – early stages in U.S.

-   U.S. and ECB M-2 money supply growth rates have been declining rapidly, falling to lowest year-over-year levels on record.

-   U.S. M2 shows growth contraction of -3.6% in June (St, Louis Fed).

-   Credit dwindling as banks say new loan generation has declined.

-   GDP growth said to be 5.8% - But much is government spending, up to 25% of GDP, a very large amount.

-   CRE crisis continues - Barry Sternlicht (experienced, smart RE investor references Morgan Stanley: massive maturity of CRE loans $500 Billion 2024, $2.5 Trillion over next 5 years (or worse).

-   Some banks taking huge losses in order not to get stuck with properties.

-   Russia having a currency crisis – causing flight of capital

-   China next crisis: collapse of RE developers triggering collapse of their “shadow banking system.” Also has 300% debt to GDP – highest in world.

-   No one can know when the debt pyramid crumbles. When it does, will cause repercussions throughout world.

-   All happening at the same time: climate change, natural disasters, country debt default, private loan default, chaos in political arena, reminiscent of banana republics.

-   Previously predicted similarities with 1930s: wars, natural disasters (cf Ukraine, Maui) – Not yet: increase in dictators.

-   U.S. Dollar should be a safe haven.