Looks about time the GOP gets a taste of their own obstructionist behavior

Senate Democrats are preparing to move stimulus items that qualify through budget reconciliation process in hopes of law getting passed by mid-March. There are still disagreements among Democrats regarding the details of the bill as Republicans warn use of budget reconciliation will hurt relations...how mush more can they be damaged I ask? (link).

The republicans are once again crying foul, like the little girls they are after blocking Obama’s every-move and not considering any of the 690 house bills that passed the house for a vote in the senate under King-Trump, using every trick they could muster to force votes on Supreme court and lower court justices, what hypocrisy!  We learned that the Democrats taking a page from Mitch McConnell play book of exploiting the rules of the Senate are willing to “go it alone” on the new Biden Covid-19 relief package if Republicans refuse to move quickly on a strong relief package (the majority want to hold it up). This past Thursday, Senate Majority Leader Chuck Schumer threatened to circumvent the 60-votes required to pass most major legislation by invoking a budget process known as reconciliation which allows some bills to bypass the legislative “BS” filibuster rule, the GOP used this to enact the KING-Trump tax giveaways if you remember! He stated that “We have a responsibility to help the American people fast, particularly given these new economic numbers. The Senate will begin that work next week”. Most of the senate older than dirt member (many in their 70’s) will likely not be alive when the massive negative consequences of this reckless spending fall on the shoulders of the next several generations. 

In order to proceed with reconciliation, Democrats will need to pave the way by passing a budget resolution which instructs committees to draft legislation. On a Tuesday conference call, Schumer told his fellow Democrats to be prepared to vote on that resolution as soon as next week.

Democrats want to pass more coronavirus relief before unemployment benefits expire in March. The Senate will also need to juggle passing legislation with former King Trump's 2^nd impeachment trial that will start the week of 02/08/2021. Democrats appear poised after getting repeatedly “bitched slapped by the GOP for years” to pass the Biden $1.9 trillion Covid-19 relief package with a simple majority!

 

The FED is a massive economic drain on our economy, they wage WAR against the working-class to enrich the elite

 

The FED in reality, is a non-independent governmental agency, that does the bidding of the powerful politicians, the TBTF-bankers, the elite/most wealthy “Top 5%” and influential corporations has been waging WAR on the American middle class and working-class for decades and both groups are getting poorer (and they have almost wiped out the middleclass). Real wages of the working class have been at best stagnant for decades (many Americans have seen a massive deterioration in their real-wages when adjusted for real-inflation) decent paying jobs are extremely scare if they can be found at all...for Americans to seek a decent single wage-job to sustain the pursuit of the elusive American Dream...[ The American Dream used to be the belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society where upward mobility is possible for everyone. The American Dream in the past was achieved through sacrifice, risk-taking, and hard work, rather than by chance] Now it is commonplace for corporation in the greedy pursuit of profits to export once decent American jobs overseas (they even get perks from out politicians to do so). While domestic small and medium businesses get burdened with taxes and government red tape. There are bailouts provided to corporations, other TBTF-bankers, and politically connected business and let us not forget to other central bankers to the tune of trillions while small-business owners of main street businesses go bankrupt. The massive almost endless flow of Q/Es have propped up the stock market, largely owned by the top 1% to 3% of the elite. So in reality the rich are getting significantly richer while a the so called greatest nation on earth has a record number of its people on food stamps; growing food insecurity has exploded, a record number of Americans have no health insurance, homelessness is on the rise (near record levels)

A massive amount of the blame 85% or better rests with the lecherous Federal Reserve controlled by the TBTF-bankers etc. as they “a private group of elites” who at will get to print money out of thin air for themselves and their cronies while their mainstream media tells everyone the FED has their backs and is a financial demigod and should never be questioned. They get richer and more powerful while the vanishing-middle-class and the working class inherits massive dent loads (economic enslavement) currently the middle class has one foot in the grave and the other foot on the proverbial banana peel, thanks to our corrupt and dysfunctional system of monetary policies and money creation. It is time to end crony capitalism, which is leading us deeper into the financial totalitarianism cesspool!

Follow the smart money...CEO's cashing out

 

Follow the smart money...After reducing buybacks to conserve cash, American corporations are repurchasing shares again at a breakneck pace. Corporate officers, on the other hand, are a bit less enthusiasm for their employer’s shares. In the first two weeks of 2021, a total of 1,000 insiders sold a bevy load of their own stock and 128 bought shares, leaving the sell-to-buy ratio poised for the highest monthly reading in data going back to 1988, according to Washington Service. Meanwhile, the same corporations announced $33 billion of buybacks over the stretch, up 49% from a year earlier, according to data compiled by Birinyi Associates. CEO’s and CFO’s and company insiders are NOT stupid, as share buying by corporate officers has declined significantly after a FED liquidity intervention and massive fiscal stimulus flood, and a near parabolic 10-month rally drove valuations of their firm’s stock to levels not seen since the dot-com bubble. Insiders and corporate leaders fully know that their firms are more than fairly valued, and they are not going to rush to put more of their own money into their firms shares at these nosebleed prices JMHO.

This is NOT first time that CEO’s/CFO’s and insiders have diverged like this.

Ø  In 2014, insider buying dried up while corporate America spent a near-record amount of money on buybacks. That year, the SPX-500 advanced 11%. Since the end of December, the SPX-500 Buyback Index has risen almost 6%, compared with a gain of 1.1% for the broader index.

Ø  Financial fuzzy-math engineering through corporate buybacks are returning back in a significant manner once again as firms are sitting on cash, are likely to break several quarters of profit declines this year; via financial “smoke-screen”

o   Corporate insiders, on the other hand, are retreating after their buying correctly signaled the bottom in March. The sell-buy ratio tracked by Washington Service exceeded 4-to-1 in November for the first time in almost 2-years and has since risen to even higher levels.

Company executives sold over $347 million worth of shares this year through Friday, that is 19 times the total they purchased. How are investors objectives aligned with management and if management is selling why are investors buying?  Ideally you would like to see that insiders and management feel that what they own will continue to grow in value, as opposed to the SELL message. Clearly, the message from the C-Suite, much like that of so many officials across the nation during Covid-19 lockdowns, (like I used to tell my kids...“do as I say, not as I do.” In this case just keep buying my stock while I sell my discounted shares to the next herd of bag-holders as I find my shares to be over-valued!

I live in the real-world, with abundant inflation! BUT If like the FED you live with Alice in Wonderland you may never see inflation either!

 

This past week Uncle Joe Biden officially became US President with a “new deal” “bailout everyone” agenda which will exceed any prior stimulus actions needed to combat serious economic contagions in American history; to defeat the Covid-19 virus, promote economic growth and restore America. There is little doubt in many Keynesian flawed economic premise minds. Now that Biden can take advantage of the still ongoing crisis and reflate, they say with certainty (absurdity I say) that the US economy will recover and grow significantly. They state with confidence that investments will come flooding into America from around the world, driving the precious dollar [that has been deteriorating since March 2020], significantly higher against the currencies of nations that persist with austerity measures (in other words, every currency of every nation that refuses to reflate as much as the US will and has been, someone ought to tell the dollar bears as the dollar has been in a 9-month downtrend despite massive FED & government massive stimulus). Even now the International Monetary Fund “IMF” is encouraging all governments to spend like drunken sailors “as much as possible”.  The TBTF bankers and investment banking establishments undoubtedly believe in this premise, because of their massive Keynesian qualifications and their commercial banking interests. They believe universally that inflation is mundane at best and under the complete control of the manipulative FED due to their biased bogus “fuzzy-math computations” in the CPI growing at less than 2%, giving the FED ample room for monetary expansion within their so-called dual mandate. Once the reflation Tsunami wave of liquidity starts these likeminded numb nuts believe that industry can begin to reinvest (they squandered extremely large amounts of rainy day funds these past 12+/- years on massive stock buybacks, and now they want and are demanding bailouts?) again with confidence when the Covid-19 pandemic is finally over. And with the savings rate having been boosted during lockdowns (far less to spend discretionary money on, and/or stimulus checks and enhanced unemployment), they believe that there is a massive wave of pent-up consumer spending to be unleashed.

The resurrection of economic pipedreams as Keynesian economic investment strategists and managers see the FED gently rising interest rates while returning markets to normality in the future, as economic recovery morphs into some significant sustained growth while national finances will return to an equilibrium balance and then turn into a surplus when tax revenues fully recover (I laughed when I think of this crap) as it is the same “BS” crap Keynesian argument of the 1960s [trickle “tinkle” down theory they embellish] resuscitated and repackaged for the 2020s. How many times have we seen and heard this before over the past 55-60 years as every turn of the credit cycle, the Keynesian argument fails only to return as the establishment’s major beacon of hope and prayers.

Inflation is No-Where to be seen due to massive distortions, fuzzy-math and down outright lying! Our Government statisticians have taken full advantage of this concept as they hedonically adjust, modify, and tweak the numbers to show that inflation is under control, they do this to reduce the burden of inflation compensation wrote into our government’s COLA commitments and other liabilities! It is a cumulative process that commenced soon after governments agreed to compensate their citizens for rising prices in the wake of the inflationary 1970s; I lived through that wild economic period.

Ø  John Williams at Shadowstats.com “someone I subscribe to” has meticulously reverse-engineered the changes in statistical method deployed by the US Bureau of Labor Statistics since the early 1980s to arrive at a figure for price inflation without such changes. The difference from official CPI estimates is astonishing. And if we look at the Chapwood Index “I also subscribe to this site” which covers the prices “of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities” we see that annualized prices measured in this manner have risen recently by an astonishing rate “much as 13.4% and at the least by 7.1%” several multiples of the official “BS” CPI data we are asked to believe in. Major cities also have high rates:

o   New York 12.7%,

o   Los Angeles 13.1%

o   San Francisco 12.8%.

o   With an arithmetic average across all 50 cities at 10.1%, this is extremely different from the CPI’s all items rate for 2020 of a paltry 1.4% now is it not.

o   The Chapwood Index shows an average annual inflation rate of 9.97% over all cities between 2011 and 2020 a 9-year period.

It is immediately obvious at least to me that the government version of inflation is the outlier, with Chapwood and monetary expansion confirming each other. The implication is that the US economy did not grow at all in official inflation-adjusted terms. Instead, it contracted persistently after adjusting for both price inflation. The mirroring of Chapwood and M-3 broad money as deflators suggests that there has been little modification in the general level of liquidity in the hands of consumers, otherwise they would show real divergences.

It becomes obvious why monetary policy planners need to believe the “BS” CPI statistics. Having set a self-serving ridiculous policy target of full employment consistent with a 2.0% inflation target, it is clear that on realistic figures interest rates are significantly suppressed. The central-banker planner’s ridiculous (JMHO) solution has been for Keynesian investment strategists, fund managers, and even foreign investors to be enticed into believing (made to believe) that price inflation is in reality extremely subdued and is no threat (I believe they are dead-wrong). But they have been willing the tug-of-war as that illusion and the bogus premise has been remarkably successful as they all now subscribe to a “Alice in Wonderland” fairy-tale that runs parallel to the world in which they exist. They are extremely frightened to admit their stupidity.

To bailout the wealthy, the corporate elite or to bailout the people, that is the question

 

I warned in September of 2019 that an economic breakdown was looming, and an economic crisis is exactly what we got [I never foresaw the Covid-19 aspect though); nevertheless 2020 was a “financial disaster” for over 55% of all Americans, this is likely one of the main reasons why so many Americans were/are seriously disappointed about the size of the $600.00 “stimulus payments” in the Covid relief bill that Congress just passed because this year has truly been a “great financial disaster” for millions upon millions of working class and poor Americans.  More Americans than ever before are just barely scraping by from month to month, and $600 is just not going to go very-far at all.  We have seen that small businesses have been getting massacred by the thousands, millions of Americans are in imminent danger of being evicted from their homes [If not for the eviction forbearance Biden Administration Announces Foreclosure Moratorium and Mortgage Forbearance Deadline Extension), interestingly more than 70 million new “initial” claims for unemployment benefits have been filed since the Covid-19 pandemic first started.  The U.S. for all intents and purposes has plunged into a very nasty economic cesspool-recession and most of the country is desperately praying and hoping that the government will do more to bail them out of this contagion.

The truth is that we could not afford another 900 billion dollar “stimulus package” on top of all the other “stimulus packages” that were already passed this past year but that did not stop Congress from their give-away bailout path. We were already $27.5 trillion dollars in debt, and all of this reckless spending is putting us on a likely nasty inflation path (but those in power the elite and wealth could care less) as Biden has just announced another preliminary bailout package valued at $1.9 trillion and he expect to follow that one with another $2.0 to $2.5 trillion) nevertheless most Americans do not really care at all that we are literally destroying our economy and finances. 

Ø  Most people are in desperate need of money, and the vast majority of them want “BIG” checks from the government as soon as possible. A OnePoll survey that was just released asked Americans about the current state of their finances, and that survey discovered that a whopping 55% consider this year to be “a personal financial disaster” ...That is over half the country!

Ø  And for those that are employed, that same survey found that 62% are planning to take on a 2^nd job in 2021 in an attempt to make ends meet...that is if they can find work at all! Among employed respondents, 7 in 10 say they need a significant raise at their job in order to make ends meet.

o   That number cannot possibly be correct, as America is the land of plenty for all! If you listen to the financial media cheerleading all is well and all will prosper!

Ø  Of course, there are not that many extra jobs to go around.  Already, there are millions upon millions of Americans that cannot find a “first job”. 

With so many Americans financially hurting, it should not be a surprise that millions of households are getting behind on their rent and mortgage payments! One-in-seven renters with family incomes from $35,000 to $100,000 were not current on their rent in November or December. The overwhelming majority of these renters in this income bracket almost 79% are expected to face eviction within two months. Similarly, 10.9% of U.S. homeowners with a mortgage were not current on their mortgage in November and December; and 56.1% of those homeowners expected they will be foreclosed on in the next several months. Congress of course keeps extending moratoriums on rent and mortgage payments [kicking the can down the road] and that has been financially devastating landlords like myself and mortgage holders like banks [but banks have NOT even come close to recognizing these looming loan-losses on their balance sheets JMHO). At some point the moratoriums will end, and when that happens, we are going to see a huge Tsunami wave of evictions that will be absolutely unprecedented in U.S. history (My opinion). Meanwhile, many Americans are going into the cesspool of massive debt in a desperate attempt to keep themselves afloat and in their standard of living financially! More than one-third of households with incomes between $35,000 and $100,000 have borrowed significantly from credit cards. Many debt payments will come due sooner than later burdening families that still suffer from long-term unemployment and under-employment and added health care costs related to Covid-19. This should mean rising credit default rates looming on the horizon!

Interestingly even at this juncture 2021 small business revenues are down more than 33% nationwide during the month of January; we are seeing that every day, more small businesses are closing their doors permanently.

Millions of American's hopes, and dreams have been severely crushed, and there is nothing that our politicians can say or do that will bring those businesses back to life (they were unable to become zombies). Unfortunately, if you are one of those Americans that have lost a business or a job this past year, then that would definitely qualify as a “personal financial disaster”. And as you have seen repeatedly in my writings supported with hard data and real surveys most of the nation is deeply hurting, and the road ahead is still littered with bouncing betties (landmines) and it could get become extremely challenging for many-many Americans! In the near-term, government “stimulus bailout payments” will definitely help financially strapped and suffering Americans. A national economic meltdown has begun, and our politicians are clueless about how to really attack it; they will try lots of things to mitigate the carnage, but most if not all of their “solutions” will only mitigate the contagions on a short-term temporary basis.

I read an article from the Aspen Institute; stating that approximately 12 million U.S. renters are “at least $5,850 behind in rent and utilities payments”, and the Aspen Institute is projecting that up to 40+ million folks could be facing eviction when the rent and mortgage moratoriums finally ends (and it will end). Unfortunately, there are no indications that this nightmare is going to end.  Last week, another 900,000 Americans filed new claims for unemployment benefits...while an additional 423,000 folks in 47 states filed new claims for what is called Covid-19 Pandemic Unemployment Assistance, the program created to help gig and self-employed workers who have been displaced. Prior to 2020, the all-time record for new unemployment claims in a single week was just 695,000, and that old record was set all the way back in 1982. We shattered that old record in 2020. But the real concern that many economic cheerleaders are ignoring is that at this point, the number of new claims for unemployment benefits have been above 695,000 for 45 weeks in a row (a terrible statistic). This significant unemployment crisis (does not even take into consideration the under-employed) has significantly hit working class and poorer Americans disproportionately hard.  Even FED-heads are being compelled to admit that the unemployment rate for low wage workers “is above 20%”.

Are we becoming a society of takers, needing bailouts and then more bailouts?

 

I believe that we as a great society (and a once-prodigious nation wherein people worked hard displayed honor and integrity, and a nation where truth and help-they-neighbor was common, where Americans  reached out to capture the American-Dream brass-ring) have crossed an extremely dangerous demarcation line that should have never been crossed when as a nation sent out so-called “stimulus payments” directly to most Americans during the incredibly early stages of the Covid-19 pandemic (a huge swath of Americans that were not even negatively impacted).  I have been a staunch Democrat all my life but even I could not even come close to rationalizing such a development as what was happening was pure “unneeded” socialism, but the politicians defended the “unneeded” inflated payments by insisting that we were in the middle of a major national emergency (then why did so many folks who did not need assistance get a windfall?).  I warned then that once our government started issuing ass-kissing checks, the American people would always keep demanding more and more hand-outs especially from the new generations that are allergic to hard work!  When it was announced that the latest round of “stimulus payments” would only be $600 per person, some Americans seems angry it was not $2,000 or even $3,000 angry...I on the other hand, was astonished at how many Americans would be receiving said handouts who did not in my opinion need or deserve one (I am not usually a tight-fisted scrooge when it comes to the working class. The Democrats have control of the White House, the Senate, and the House of Representatives and one of the first things they plan to do is to deliver more ass-kissing bailout money (another $1,400) on top of the already approved $600.00) to the American people (again to many who have jobs, never lost any income etc. and to many folks who are gaming the system “not even looking for work”). Unfortunately, Americans have tasted free and easy taxpayer money and they want more and more!

Vice-President, Harris, previously proposed giving out monthly $2,000 checks for the duration of this pandemic; astounding stupidity nevertheless it was close to passage and it would be a recurring monthly $2,000 check mirroring the payments proposed in the “Monthly Economic Crisis Support Act” that she introduced in the Senate in May 2020. So, if you are married with two kids, you would have gotten $8,000 every month under the plan. Most Americans would have been very eager to sign up for would they not! Sure, beats working right. Where would the money come to pay for the approximately $600 billion every month, hell no one would care as it would mean that it would add more than $7 trillion dollars to our national debt over the course of an entire year...very doable right ☹.

The great thinker (and a fellow Brother Mason) Benjamin Franklin once made the following statement. “When the people find that they can vote themselves money that will herald the end of the republic.” Sadly, I believe we have now reached such a massive life-altering republic altering tipping point. And this comes at a time when millions of Americans are in desperate need because the real economy continues to implode all around us due to failed economic policies. As the U.S. economy continues to come apart at the seams, finding sources of tax revenue will become almost impossible. Perhaps corporations who have not paid any taxes in many years will step up and offer to pay their fair share, and maybe the elite and most wealthy will follow suit.

Watch the greenback as it could break either way...a pop and the markets drop

The indexes remain just shy of or at their all-time highs despite the mega-warning signals that these levels of euphoria which suggests a potential nasty counter-trend correction is imminent. I have been suggesting that markets are headed into a mega bubble of epic size as all of the preconditions for a mega bubble are in place. Artificially depressed financing costs of new-debt that historically has been utilized substantially to buy-back-stock and keep zombie-firms alive are at record historic lows, new participants in this market today are being drawn like moths to a flame into these giddy markets, and the combination of significant accumulated savings (stimulus induced) and low prospective returns on traditional assets have created the desire to engage in massive speculative activity! In the months ahead, investors will need to pay close attention to risks of a monetary policy reversal, massively rising equity valuations, and the rate/trend of the real post-pandemic recovery. These past 8-9 months can best be described as a period of unprecedented market “extreme optimism and pure euphoria” as I pointed out previously in my weekend write ups there was a wave of bullishness due to recent news, with now (3) Covid-19 vaccines showing promise against a backdrop of FED manipulated zero interest rates, a record fiscal deficit (debt) and an ultra-dovish es-FED-chairman Janet Yellen soon to be in charge of it all as she is Biden’s pick to run the treasury.  This likely blow-off phase is extreme euphoria, the likes of which surpasses even the dot.com bubble. As I have discussed before, the November-December rally has been driven by the mostly shorted hard-to-borrow equities, taking the SPX-500 to technical levels not seen in many-many years, similar to like we saw back to 2000. The November-December rally was clearly a massive-short covering rally as well. As the most shorted stocks were up 28.48% in November alone while the SPX-5000 was up about 11.1%.  

Already Goldman Sachs “most shorted” index of stocks is already up 15% in 2021 and more than 200% over the past year.  The Goldman Sachs Most Shorted Index’s RSI reading is now over 85, only eclipsed by June 20, 2018. Short sellers like myself have been put on the endangered species list 😊 (we have enjoyed some really decent shorts of late) and the fuel from squeezing the newbie shorts appears to be running quite low now as looking a short interest is the lowest in over 15 years for the SPX-500.

Is LONG & Strong about to lose its luster? Massive debt has been the bullish catalysts!

Investors have still been massively long (the vast majority all on the same side of the proverbial boat) “Big Technology”’ on a 10-year basis, entering the year in/at the 98^th percentile it is a bit more subdued on a trailing basis, ~80^th percentile, leaving them a tad bit “underexposed” into 2020/Q4 earnings, but this divergence has already shifted significantly as new net exposure now sits at the 98^th percentile on TTM horizon and the 100^th a percentile again on a 10-year view. So much for investors rotating out of technology names; and we saw that within the price action this past week to name a few”

• v NFLX            (up13.49%)
• v GOOG           (up  9.55%)
• v AAPL            (up  9.38%)
• v FB                   (up  9.21%)

Was this week another major inflection points of a potential rotation back into “Big Technology” or is it a sly head fake we will soon find out (watch the semiconductors for a signal) as undoubtedly, investors have been rewarded over the past decade for following the TFAANG+M playbook.

Interestingly I saw data: this week that the NAAIM (National Association of Active Investment Managers Index) jumped to 106.76% this week from 94.51% equity exposure last week; this is a very extreme reading.  I have been watching our greenback, dollar quite closely currently the commercials traders have been buying the dollar and hedge funds are now sporting record shorts.  Historically commercials usually have it right, and as I last week that may have some short term “counter-trend” negative implications for the market.

While the Dollar has been in a clear downtrend, the recent buying by commercial traders could result in a swift (countertrend) bullish counter-trend relief rally as I said last week this would potentially become a near-term headwind for stocks and commodities that are priced and denominated in dollars.  The incessantly hyped on CNBC [by their paid cheerleaders] re-opening trade could potentially take a significant breather and due to extreme overbought conditions, a likely price-pullback. In the event the dollar does show some short-term strength, you could see a bounce in recently weak sectors like utilities and consumer staples (as well as bonds as yields get compressed).  The massive bullish 75% plus or minus gains off the March 2020 lows are more likely to experience a decent pullback. As I have written in recent weeks, this is the beginning of a near-term massive stimulus induced new business cycle and it does not pay to get too cute trying to predict the depth and timing of the pullbacks as the locoweed feasting herd has been firmly conditioned like Pavlov’s dogs to buy any and all dips no matter how shallow.

Does this mean we will experience a nasty retracement / pullback...not necessarily; but it may mean that a near term pause or pullback is desperately needed to consolidate the massive 75% gains off the March 2020 lows.  

This past Tuesday, Bank of America issued their monthly Global Fund Managers Survey; their key takeaways support my general view that we can expect decent breather / retracement in weeks ahead likely when most of the behemoth player earnings have been posted.  The implication I am trying to convey is that the short-term risk-to-reward ratio is skewed more than it has been for the 9+ months we have been in a non-stop liquidity (fiscal stimulus and FED easy-money policies) bullish trend in the face of increased skepticism every step of the way.  Interestingly we have seen that overall cash level of investors dropped to a paltry 3.9%, the lowest level experienced since March 2013, triggering one of my recent “sell-signals”

Also, another bearish contrarian signal that recently tripped for me, overall exposure to Emerging Market stocks increased a whopping 7.4-percentage points to a net 63% overweight (the highest overweight for Emerging Market stocks on record)...NOW with investors the most optimistic on massive profit expansion since the levels, we saw back in 2002 meaning that they are “extremely bullish” said one-directional sentiment raises the overall risk that a market correction is “potentially close at hand.”  Despite these and other technical and fundamental indicators pointing to a near-term top and market weakness we cannot underestimate the massive power of unabated gigantic government stimulus(s) and how they placate and euphorically enhance the bullish spirits and reckless buying. 

We have seen a huge A tsunami wave of deficit/debt stimulus from the CARES act about $2.34 trillion the recent $935 billion Covid-19 relief bill and now another $1.9 trillion proposed from Uncle Biden called the “American Rescue act” and just when you thought it could not get worse Uncle Joe Biden has proposed another $2.0 trillion in what he calls the “Climate and Infrastructure package.”  If we just add those items up we are at ~$6.7 trillion if we couple that with another ~$3.0 trillion or so of balance sheet expansion by the FED and you are approximating $10 trillion in massive stimuli (almost 48% of current GDP).

• Here is what the well-primers believe what is coming in the next 2 massive stimuli proposed packages:
• An additional $1.9 trillion to basically tide over consumers and businesses until so called normalcy returns (if it ever does).
• $1,400 stimulus checks (in addition to recent $600 payments to middle- and lower-income households).
• Supplemental weekly unemployment benefits would rise to $400 from $300 and last through September instead of March...the unemployed and those gaming the system will be delighted.
• Extremely needed $350 billion to state, local and territorial governments.
• A proposed $15.00 an hour minimum wage (unlikely to get passed as the GOP is adamantly opposed to helping the working class at the expenses of businesses).
• Eviction moratorium extended to March 31^st as a landlord I dislike this can-kicking proposal.
• Student loans payments will remain on hiatus regarding payments until September 30^th.
•  $30 billion to help struggling households catch up on overdue rent, and energy bills.
• $20 billion to state and assist with a national vaccination program, including launching community vaccination centers around the country and mobile units in hard-to-reach areas.

With Uncle Bidens 2^nd proposal for $2.0 trillion for Climate and Infrastructure programs and to eliminate 0% Carbon from the power grid by 2035...and just some of the highlights I have referenced below.

ØRebuild Roads, Bridges, Infrastructure.

Ø  Ban Fracking on federal land.

Ø  Cut emissions in half by 2030.

Ø  Cash for Clunkers: EV trade in program.

Ø  500,000 new charging stations around the country.

Ø  Converting Capital Gains tax rate to Ordinary Income rate (Wall Street, fund-managers etc.  will hate this as they have been gaming the system for years).

Ø  Increasing Corporate Tax Rate from 21% to 28% (this alone could result in a loss of ~$20 to $24.75 in SPX-500 earnings).

 

FOOD No such thing called inflation especially if you do not measure it or count it!

 

Massive Food inflation is just the tip of the proverbial inflation iceberg...

food price indexes over the past 12-18 months have been increasing at a healthy 4.2% clip, but our lying government and FED heads have still been reported 12-month rolling “official” inflation rates in the US at a comical and simple and anemic 1.4%. To refresh your memories, this is what happened with soaring food prices in 2010. In 2010 I remember fondly that corn, the staple food of many soared in price, and the US Department of Agriculture, revised their strange forecast for the US corn crop yield downwards by 12.6 million tones, or 3.9%, to 321.7 million tones.

Fast forward to 2021 and food prices are starting to soar again. Within the past year, my followers know that I advocated the purchase of the corn, coffee, and soybean (there are several ETFs like SOYB back in August of 2020 when soybeans were still selling at about $8.50 a bushel (SOYB was trading around $14.00, and it ran so far to $21.00+) soaring more than 50% in price. Today, the price of food staples around the world, like rice, are nowhere near the disastrous price peaks of over $900 per metric ton experienced back in 2008. However, the price of rice around the world has still been steadily climbing since a low of about $350 per metric ton in September of 2015. Since then, rice prices have climbed to about $500 per metric ton in many Asian nations to start this year, representing a whopping 43% increase in price over the past five years (not inflationary as who needs to eat). This is happening while the “BS” narrative of the cheerleading (paid shills) media has been touting that food prices have been dropping since April of 2020, which is semi-true for some food staples, the fact is that over the past five years, most food prices are still trending strongly higher.

For example, over the past five years, in the US, beef prices have increased by 19.8%, pork by 29.7% and Atlantic salmon by a whopping 36%.

However, even as food prices have soar, governments and global central bankers continue to comically report anemic non-existent rates of inflation. Apparently, their reported inflation data applies only to people that apparently have no need to eat.

As I have discussed numerous times, and most recently in my last weekend report if you believe the crap, data, and statistics or everything the government is telling you about economic data, then most likely you will also fall victim to Ponzi schemes and scams!  

Is it a just a pure smokescreen, or is the savings rate really exploding due to non-payments?

Is it a smokescreen, or is the savings rate exploding? Something unprecedented seems to have happened in the near-term aftermath of the passage of the massive $2.2 trillion CARES act: as a result of the massive unprecedented transfer of wealth from the deficit creating government to consumers in the form of countless stimulus measures, personal incomes soared [many due to the massive enhanced $600.00 additional weekly unemployment, and the forbearance “no need to pay” rent, school loans, mortgages of auto loans ] while personal spending plunged (as the economy was largely shut down especially for spending on services like restaurants, bars, and movies etc.), resulting in an explosion in the annualized amount of Personal Savings, which soared by a mind-blowing $4 trillion in this past May, rising from $2.1 trillion to a staggering ~$6.0 trillion a massive new record of 33% disposable personal income! Interestingly contrary to CNBC-hyped expectations that rational and logical consumers would promptly use this income wealth transfer to pay down debt and get their financial affairs in order, [what a joke] as many turned into speculators and spent those government checks to buy stonks. I only bring all this up because the US savings rate, which has since dropped of substantially as a result of the gradual reopening of the economy as Americans have been spending a significant portion of their precious Covid-19 stimulus checks; will likely soar again (potentially a NEW-record) when the latest personal spending and income data is released next month to account for the passage of the recent $964 billion stimulus package, and then it could soar like a rocket-ship, once Uncle Biden's various Covid-19 stimulus programs kick in.

Let us reflect upon the potential Tsunami wave of stimulus that is about to sweep over the US economy, both the consensus and apparently the Biden administration economists seem to be ignoring just how Covid-19 containment measures can delay the benefits of fiscal stimulus. In 2020, fiscal authorities were operating blindly and ignorantly as no amount of fiscal stimulus was going to revive the devastated service sector. The stimulus boosted some goods spending (panic hording) and some of what would have been spent on services went into such goods, but a major portion went into excess savings. This is one reason why the multiplier effects of the stimulus were quite low. 

Will all these government transfer payments (taxpayer debt laden debt) and excess savings send the economy into and inflation overdrive...as the 3rd substantial stimulus in 12 months, following the $2.2 trillion CARES act and the $934 billion bipartisan relief bill that passed in December will likely lead to an even stronger economic tailwind than many expect...unfortunately it is extremely hard to know how much of this pent up spending power will be released and deployed when the economy reopens as I simply do not have any historical data of real experience to draw upon. However, logic and common sense suggests that this wave of stimulus will be quite a bit more than the effective stimulus last summer as much of it will be focused on services: So, we should expect there to be a rotation of the consumer basket towards experience-based spending from goods spending once the virus is sufficiently contained and as folks feel comfortable reengaging in pre Covid-19 activities. 

Of course, it will take some time to see how this potential liquidity-transfer “bailout” plays out, but as I pointed out last week, we have already seen a significant boost to spending in the first half of January. It will also take some time to figure out how much of the Uncle Biden $1.9 trillion bailout package is going to pass (consensus appears to believe that the final number will be around $1.25 trillion). And we will not know the lagged impact of fiscal stimulus on the service sector economy until it starts to reopen. 

Please also consider that the “Personal Savings” rate data likely does not include the fact that millions of Americans are now working from home. They are not commuting (buying gasoline, paying for parking, needing more-frequent auto service, taking fast-food meals on the fly, paying tolls etc.). They are not buying lunch, snacks, and beverages in high priced shops, kiosks and restaurants set up to service the American cubicle farms. They are not getting haircuts, manicures, beauty-makeovers as frequently. They are not buying business clothing as frequently. When at home are making their own meals as demonstrated by increasing grocery store sales paired with sharp declines in restaurant sales (seems quite logical right?). And they are using the money they are not spending to pay down some debt (but not rent and mortgages). 

Note that most of the hype of consumer savings rates have been the TBTF-bankers. They are not saying people have burgeoning savings accounts. They are increasingly concerned that folks are not seeking money from banks (borrowing) as much as they used to. In the great USA Debt-farming is far and away the largest and most lucrative enterprise in America; vastly outstripping the actual buying and selling of goods and services. When Americans owe less debt to the TBTF banks, bankers become uncomfortable. 

However, variants of Covid-19 as I predicted months ago could develop and could force new shutdowns and delaying the recovery. Now for the bad news because while the FED is so overly confident that there is absolutely no basis for expecting a surge in inflation, if I am correct and the overall US household savings soars to over $2 trillion and then is deployed aggressively in the coming months into the weakened economy due to pent-up-desires for services and things I guarantee that prices will rise sharply in the 2nd half of the year...which incidentally when I expect a market implosion to start! Because once even the omnipotent FED concedes that fiscal and monetary policies have unleashed a huge wave of inflation, the FED will once again be boxed in a corner and will be forced into having to aggressively start tightening financial conditions, especially if inflation surges above their “BS” 2.5% threshold. 

Curiously: This past week’s, preliminary Markit PMIs were released for January, interestingly (as we predicted they would) the headline numbers ticked up. The release also showed unfortunately that input prices for services exploded higher again, to another all-time high. Unfortunately, those higher input prices have not yet fully made their way through to prices charged for said services. Given the close relationship between input prices and prices charged, we should expect prices charged to consumers to rise higher over the coming months. This makes logical sense since service providers will naturally seek to protect their so-called profit margins. Also interesting was that core personal consumption expenditure prices, which is the FED’s “BS” preferred inflation indicator, also appears ready to move considerably higher in order to catch up to the increase in overall input prices. This has obvious negative inflation implications for FED policy. Do expectations for rate hikes get pulled forward? Or, does the lecherous FED who serves the will of the TBTF-bankers, the elite and politicians just sit back and watch as prices move to and through their bogus inflation target...they have alluded to the premise that they will do the latter, and we may soon see how strong their real commitment is. The market implications here are pretty straightforward as tapering is tightening. Pulling rate hike expectations forward is tightening. Allowing inflation to run hot while doing nothing could be seen as a strange de facto easing, which could give even more fuel to the cyclical trade and make those inflation hedges like precious metals even more attractive.

 

When will the FED's Ponzi scheme actions be seen for what it is? Just a boost for the stock market!

Due to incessant central banker and/or central planners as many like to be referred to...free-flowing massive intervention monetary policies and massive government stimulus have convinced traders and most investors that risk “has simply disappeared”, leaving these markets unable to fulfil their most significant role as a price discovery mechanism. I have repeated written and criticized the FED and central bankers for slashing rates and flooding the financial system with cyber money since the onset of the Covid-19 pandemic, arguing that the central banker’s moves have made it difficult to gauge the real health of the US economy as a vast number of zombie-firms are still breathing. As with cooking frogs you place them in tepid water that is slowly being heated to a rolling boil, investors are being conditioned not to recognize the danger in this market like Pavlov’s dogs. US stocks are up about 80% since their lows in March 2020, while spreads on ballooning corporate debt a historic measure of how much extra interest corporate borrowers have to pay compared to those seeking the safe haven of the US government, have mysteriously returned to pre-Covid levels this month (crazy-shit JMHO). The FED is once again taking on the persona of the proverbial “800-pound gorilla” continuing to price out investors who typically provide the needed liquidity in times of distress. The huge contagion as I see it with these unprecedented and likely unsustainable government and central bank interventions is that risks to capital become concealed even as they grow to the sky like the old story of “Jack and the Beanstalk” worse yet the FED’s policies have greatly exacerbated economic and wealth inequality! The FED’s policies and programs have directly contributed to exceptionally generous market conditions where nearly everything is bid up to obscene levels while downside volatility is curtailed. The market’s usual role in price discovery has effectively been halted we are in an environment where there is a constant search for yield that has driven far too many into riskier corners of the markets.  The FED’s drastic panic measures have helped to limit economic deterioration and they have rescue ailing businesses (far too many zombies) But they have also sparked two dangerous premises: ** That fiscal deficits don’t matter, and that no matter how much debt is outstanding, they and the government can effortlessly, safely, and reliably pile on more and more! As with the new-order where in 30-year-olds are still living in their parent’s basements, rent-free and board-free we can only wonder whether the markets will ever be expected to make it on their own again.

These markets & economy are running on the back of a massive deficit spending “debt”

These markets and economy are running on the back of a massive deficit spending “debt” wave portrayed by the masses and media as necessary and needed stimulus and once consumed then what manipulative game will the FED and government introduce to prop up the economy and markets?

Speculation reigns large: another month has almost finished (will January hold a similar fate), and we see another record in margin debt! As in November & December, combined margin debt has risen 18% to $779 billion; this has happened as the SPX-500 has risen almost 15% in November & December combined. From this past March, margin debt has risen a staggering 63%; signifying a massive rise in bullish sentiment and the willingness to take on debt-leverage, which helps propel equities higher and crushes them on the way down.

Still the indexes remain just shy of their all-time highs despite the mega-warning signals that these levels of euphoria which suggests a potential nasty counter trend correction is imminent. I have been suggesting that markets are headed into a mega bubble of epic size as all of the preconditions for a mega bubble are in place. Artificially depressed financing costs of new-debt that historically has been utilized substantially to buy-back-stock and keep zombie-firms alive are at record historic lows, new participants in this market today are being drawn like moths to a flame into these giddy markets, and the combination of significant accumulated savings (stimulus induced) and low prospective returns on traditional assets have created the desire to engage in massive speculative activity! In the months ahead, investors will need to pay close attention to risks of a monetary policy reversal, massively rising equity valuations, and the rate/trend of the real post-pandemic recovery. These past 8-9 months can best be described as a period of unprecedented market “extreme optimism and pure euphoria” as I pointed out previously in my weekend write ups there was a wave of bullishness due to recent news, with now (3) Covid-19 vaccines showing promise against a backdrop of FED manipulated zero interest rates, a record fiscal deficit (debt) and an ultra-dovish es-FED-chairman Janet Yellen soon to be in charge of it all as she is Biden’s pick to run the treasury.  This likely blow-off phase is extreme euphoria, the likes of which surpasses even the dot.com bubble. As I have discussed before, the November-December rally has been driven by the mostly shorted hard-to-borrow equities, taking the SPX-500 to technical levels not seen in many-many years, similar to like we saw back to 2000. The November-December rally was clearly a massive-short covering rally as well. As the most shorted stocks were up 28.48% in November alone while the SPX-5000 was up about 11.1%.  

Already Goldman Sachs “most shorted” index of stocks is already up 15% in 2021 and more than 200% over the past year.  The Goldman Sachs Most Shorted Index’s RSI reading is now over 85, only eclipsed by June 20, 2018. Short sellers like myself have been put on the endangered species list 😊 (we have enjoyed some really decent shorts of late) and the fuel from squeezing the newbie shorts appears to be running quite low now as looking a short interest is the lowest in over 15 years for the SPX-500.

However, it is not just forced short covering that has been driving the meltup: as massive derivative action activity in the options market is purely “euphoric” a huge source of potential dislocation. As of this past week call volumes were 6x normal, and even more striking: call buying has just gone parabolic and now represents about 47% of NYSE total volume the highest level ever. While at the same time, the put/call ratio is at multi-year lows.

 

The euphoria is not just in calls, it is everywhere with 90.5% of SPX-500 stocks now trading above their 200dsma reaching an overbought level last seen in 2014. This flood into equities has pushed the forward P/E of the SPX-500 back to and above 2000 levels. This is also a function of the surge in money growth. We have seen across a wide variety of indicators this market euphoria is increasingly disconnected from fundamentals and real economic variables. With the massive disconnected between markets and the economy stretched extremely tight like a rubber-band, investors have basically gone all in stocks hoping that the largest and biggest bubble in stock history keeps inflating!

I am significantly SHORT (70%), hence I will only look to add to my existing SHORTS sparingly, I am looking to start to leg into the leveraged 3x bear-funds!  These markets and economy are running on the back of massive deficit spending “debt” portrayed by the masses and media as necessary and needed stimulus and once consumed then what manipulative game will the FED and government introduce to prop up the economy and markets.

In my opinion this extremely long in the tooth, 12+/- year long bull market since 2009 has finally matured into a fully-fledged massive bubble due to massive intervention and manipulation and almost endless liquidity. Featuring extreme overvaluation, explosive price increases (many times in zombie firms) frenzied issuance (especially the issuance / of stock at nose-bleed price levels, and nutty IPO’s) and hysterically speculative investor behavior, I believe this period / cycle will be recorded as one of the great bubbles in financial history, right along with the South Sea bubble, the bubble prior to the Great Depression of 1929, and the Dot-com bubble of 2000. 

Massive Hindenburg type bubbles are when fortunes are made (playing the proverbial “dark-side” sell/short-side) and lost (due to stubbornness of not taking profits) where old savvy investors truly prove their determination, courage, and knowledge [ "buy when you feel like the world is coming to an end...and sell when you believe there is no stopping the bull-train and extreme euphoria has gripped thew markets]! We need to position our positioning a portfolio to avoid the worst of pain that becomes inflicted by a massive bubble bursting is the hard part.

 

I warned in September of 2019 that an economic breakdown was looming, and an economic crisis is exactly what we got [I never foresaw the Covid-19 aspect though); nevertheless 2020 was a “financial disaster” for over 55% of all Americans, this is likely one of the main reasons why so many Americans were/are seriously disappointed about the size of the $600.00 “stimulus payments” in the Covid relief bill that Congress just passed because this year has truly been a “great financial disaster” for millions upon millions of working class and poor Americans.  More Americans than ever before are just barely scraping by from month to month, and $600 is just not going to go very-far at all.  We have seen that small businesses have been getting massacred by the thousands, millions of Americans are in imminent danger of being evicted from their homes [If not for the eviction forbearance Biden Administration Announces Foreclosure Moratorium and Mortgage Forbearance Deadline Extension), interestingly more than 70 million new “initial” claims for unemployment benefits have been filed since the Covid-19 pandemic first started.  The U.S. for all intents and purposes has plunged into a very nasty economic cesspool-recession and most of the country is desperately praying and hoping that the government will do more to bail them out of this contagion.

The truth is that we could not afford another 900 billion dollar “stimulus package” on top of all the other “stimulus packages” that were already passed this past year but that did not stop Congress from their give-away bailout path. We were already $27.5 trillion dollars in debt, and all of this reckless spending is putting us on a likely nasty inflation path (but those in power the elite and wealth could care less) as Biden has just announced another preliminary bailout package valued at $1.9 trillion and he expect to follow that one with another $2.0 to $2.5 trillion) nevertheless most Americans do not really care at all that we are literally destroying our economy and finances. 

Ø  Most people are in desperate need of money, and the vast majority of them want “BIG” checks from the government as soon as possible. A OnePoll survey that was just released asked Americans about the current state of their finances, and that survey discovered that a whopping 55% consider this year to be “a personal financial disaster” ...That is over half the country!

Ø  And for those that are employed, that same survey found that 62% are planning to take on a 2^nd job in 2021 in an attempt to make ends meet...that is if they can find work at all! Among employed respondents 7 in 10 say they need a significant raise at their job in order to make ends meet.

o   That number cannot possibly be correct, as America is the land of plenty for all! If you listen to the financial media cheerleading all is well and all will prosper!

Ø  Of course, there are not that many extra jobs to go around.  Already, there are millions upon millions of Americans that cannot find a “first job”. 

With so many Americans financially hurting, it should not be a surprise that millions of households are getting behind on their rent and mortgage payments! One-in-seven renters with family incomes from $35,000 to $100,000 were not current on their rent in November or December. The overwhelming majority of these renters in this income bracket almost 79% are expected to face eviction within two months. Similarly, 10.9% of U.S. homeowners with a mortgage were not current on their mortgage in November and December; and 56.1% of those homeowners expected they will be foreclosed on in the next several months. Congress of course keeps extending moratoriums on rent and mortgage payments [kicking the can down the road] and that has been financially devastating landlords like myself and mortgage holders like banks [but banks have NOT even come close to recognizing these looming loan-losses on their balance sheets JMHO). At some point the moratoriums will end, and when that happens, we are going to see a huge Tsunami wave of evictions that will be absolutely unprecedented in U.S. history (My opinion). Meanwhile, many Americans are going into the cesspool of massive debt in a desperate attempt to keep themselves afloat and in their standard of living financially! More than one-third of households with incomes between $35,000 and $100,000 have borrowed significantly from credit cards. Many debt payments will come due sooner than later burdening families that still suffer from long-term unemployment and under-employment and added health care costs related to Covid-19. This should mean rising credit default rates looming on the horizon!

Interestingly even at this juncture 2021 small business revenues are down more than 33% nationwide during the month of January; we are seeing that every day, more small businesses are closing their doors permanently.

Millions of Americans hopes, and dreams have been severely crushed, and there is nothing that our politicians can say or do that will bring those businesses back to life (they were unable to become zombies). Unfortunately, if you are one of those Americans that have lost a business or a job this past year, then that would definitely qualify as a “personal financial disaster”. And as you have seen repeatedly in my writings supported with hard data and real surveys most of the nation is deeply hurting, and the road ahead is still littered with bouncing betties (landmines) and it could get become extremely challenging for many-many Americans! In the near-term, government “stimulus bailout payments” will definitely help financially strapped and suffering Americans. A national economic meltdown has begun, and our politicians are clueless how to really attack it; they will try lots of things to mitigate the carnage, but most if not all of their “solutions” will only mitigate the contagions on a short-term temporary basis.

I read an article from the Aspen Institute; stating that approximately 12 million U.S. renters are “at least $5,850 behind in rent and utilities payments”, and the Aspen Institute is projecting that up to 40+ million folks could be facing eviction when the rent and mortgage moratoriums finally ends (and it will end). Unfortunately, there are no indications that this nightmare is going to end.  Last week, another 900,000 Americans filed new claims for unemployment benefits...while an additional 423,000 folks in 47 states filed new claims for what is called Covid-19 Pandemic Unemployment Assistance, the program created to help gig and self-employed workers who have been displaced. Prior to 2020, the all-time record for new unemployment claims in a single week was just 695,000, and that old record was set all the way back in 1982. We shattered that old record in 2020. But the real concern that many economic cheerleaders are ignoring is that at this point, the number of new claims for unemployment benefits have been above 695,000 for 45 weeks in a row (a terrible statistic). This significant unemployment crisis (does not even take into consideration the under-employed) has significantly hit working class and poorer Americans disproportionately hard.  Even FED-heads are being compelled to admit that the unemployment rate for low wage workers “is above 20%”.