This Week in Barrons – 5-7-2017:
“Let the games begin.”… Pres. Donald Trump
Dear President Trump:
You championed yourself as a savior of the American worker during your campaign, but you have been largely silent on the collapse of the retail industry. The retail industry has shed more jobs since October – than the entire coal industry employs. Retailers employ 1 out of every 10 Americans, and their unemployment issue is only expected to get worse. Currently more than 3,200 stores have closed, and analysts expect that number to rise to over 8,600 closures before the end of the year. For comparison, 6,163 stores were shut down at the height of the 2008 recession. The typical retail employee is low-skilled, spans all age brackets, and often requires a flexible working schedule. Therefore, retail workers losing their jobs will have a hard time finding a new one.
President Trump, in terms of the federal minimum wage (which has an enormous impact on the retail industry), you have made conflicting statements. On one hand, you said that the federal minimum wage should be raised to $10 per hour, but then you said that it’s really an individual state issue. As more retail workers lose their jobs, the group of unemployed workers that do not possess a set of skills that is easily transferable to another industry continues to expand.
President Trump, either you’re the best salesman I have ever seen, or there's something bigger in play.
- On one hand, you have enacted more business focused executive orders than any other President, but on the other hand you’ve been hell bent on encircling Russia with NATO.
- On one hand, you said NATO was obsolete, but on the other you love them (as long as they pay their bills).
- On one hand, you said that we shouldn't interfere in other countries, but on the other you lob missiles into Syria.
- On one hand, you said that you would ‘drain the swamp’, but on the other you brought in the alligators from Goldman Sachs.
From day one I told my friends that you just didn’t wake up one day and say: “Hey, I think I want to be President of the U.S.” No, this must have been in the works for a long time. You were probably courted by major powers, talked into giving up your lavish lifestyle, and forced to battle through the ‘primary’ muck to become President. For what? I think that the global elites finally realized that fixing all of the world’s ailments are for naught – if the U.S. economy folds. I think you were picked to focus on fixing the business ills of our nation, and bring the U.S. back to the competitive stage again. I can almost hear the conversation:
G-Elite: Donald, we told you we could make it happen, and now you're ‘the man’.
Trump: Yes – we did it, and I can't wait to start fixing things.
G-Elite: About all of that, you go right ahead and put machinists back to work, make trade deals with nations, and get the economy going again. In fact, we selected you to be President because the U.S. is hanging-on by a fiscal thread, with 50% of its people living paycheck to paycheck. The U.S. is the strongest country on earth, but if left to continue on this path – it will go ‘belly up’. You focus on that. And as far as any wars and a global blueprint goes – that’s off limits – understand?
G-Elite: Because the world is complex. We are joined at the hip with many other nations. Our foreign policy has to include their best interests, the Middle East, global natural resources, and nuclear weapons. The U.S. Dollar must remain as the global reserve currency, and the Russia-China-‘Silk Road’ alignment is currently challenging that. We just can't leave all of those elements up to a rookie.
Trump: But, I’ll look stupid flip-flopping on my stance of not getting involved in places like Syria.
G-Elite: Don't worry about it – the American people are gullible. Just talk about the horror of gassed babies, and they'll let you bomb Syria. In fact, do something like lobbing missiles onto a vacant Syrian airbase, and we'll have our media folks tell the world how ‘Presidential’ you are. Concentrate on making J.Q. Public’s life better via pay raises, building ‘the wall’, and you'll be a hero.
Trump: This President thing is harder than I thought. With crude oil sliding below $45 a barrel, most of our domestic oil producers are unable to balance their budgets. Venezuela is on the brink of anarchy. Iran is under pressure, and Russia is struggling to escape a recession. After all, oil prices have given up all their gains since OPEC and non-OPEC producers agreed to curb supply in November. And then there’s healthcare…
G-Elites: We have an idea about healthcare for you. To make it more competitive, try putting 200 doctors and 20 data scientists in a room, have them catalogue every single medical treatment and sub-treatment, and attach a tracking SKU to each one. Then have Amazon create a web site where all the hospitals, doctors, and insurance companies can publish their prices. People can than ‘click-to-buy’ the cheapest hip replacement (for example) along with the doctor & place with the highest number of stars – that is covered by their current insurance plan. It’s transparent, competitive, and simple.
Trump: Wow – great idea. Let the games begin!
The ‘beat down’ in silver and gold started about April 15th (see chart below), and has been one of the most dramatic I've ever seen. This was NOT a controlled decent but rather an all-out attack, down 13 out of 15 sessions. I personally don’t think this was any coincidence. I call it synchronicity – coincidence with a purpose. How is it that during the EXACT three weeks that our precious metals were getting pummeled, Bitcoin (a non-manipulated currency) was making new all-time highs? That answer is easy. For Bitcoin, there are no ‘paper’ futures pits, and no Central Banksters that can attack Bitcoin by printing $3B fake shorts. Nothing proves the manipulation of gold and silver more than watching a digital currency go to all time new highs, while one of the most respected precious metals of all time – collapses (see chart below).
But then I asked myself: “Is there still a demand for gold and silver?”
- Hong Kong’s gold imports more than doubled last month – rising to 111.647 tons in March from 47.931 tons in February.
- India’s February gold imports surged 82% higher to 50 tons.
- And Russia’s gold buying returned with the Russian Central Bank buying 37 additional metric tons.
If I was writing a spy novel, the plot would include forcing everyone out of their gold and silver holdings into crypto-currencies. Then I would architect a massive ‘EMP-like’ power outage that would collapse all of the power grids, and make the crypto-currencies worthless. As intriguing as that sounds, that’s just NOT going to happen. But a lot of smart people are talking about how 2017 is really going to ‘shake people up’ – so something ‘unnatural’ is definitely going on here – stay tuned.
This week’s ‘Non-Farm Payrolls Report’ showed 211K new workers entering the workforce and a 4.4% unemployment rate. Unfortunately, the birth/death model produced 255K of those 211K new jobs. The birth/death model is an attempt to estimate how many new businesses (with employees) are formed each month. However, there are no real tax records or receipts to prove any of that activity – it’s simply a fictitious estimate. And if we subtract the 255k ‘fictitious’ jobs from the 211K actual jobs, we find out that we actually LOST 44K jobs last month. As SF points out, if you examine the unemployment report sector by sector – you will find is that the group of individuals that re-enter the workforce quickly after being laid-off is actually quite low (1.7%) and DECLINING. That means computer programmers and others with present day skill sets are finding employment opportunities quickly, but others with non-transferrable skills are in an over-whelming majority and are having a much tougher time finding employment.
The hard data is showing that a recession is close:
- Apple missed earnings, and Facebook’s earnings failed to impress,
- Productivity fell 0.6%,
- Core factory orders fell the most in 13 months,
- Unit labor costs rose a huge 3%,
- Ford, GM, and other auto company sales fell between 5% and 7%,
- Subprime auto loans are becoming a problem,
- Insiders are selling their own company’s stock at record rates of 11 sells to every 1 buy,
- The discrepancy between a corporation’s reported ‘adjusted’ profits and their real corporate profits (GAAP) is running at a record 22% difference,
- The International Monetary Fund raised its annual growth forecasts for China by 0.1%, Japan by 0.4%, the UK by 0.5%, and left the U.S. economy unchanged.
- And it seems that S&P 500 companies that generate more than half their revenue overseas are posting quarterly earnings that are DOUBLE that of companies that conduct most of their business domestically.
I think it’s possible that we set all-time highs next week over the French election. This could signal a ‘top’ similar to what happened on March 1st. After all, post March 1st we’ve spent the last 64 days trading sideways. I could easily see us blast higher for a day or two, and then begin trading sideways again. The flip-side of that is the phrase: “Buy the rumor, sell the news.” Could a Macron win in the French election be a ‘sell the news’ event? It could. Macron is a Rothschild banker who is all about keeping the socialist policies intact, and the European Union alive and well. However, when considering the future of the U.S., does a Macron win equate to our retailers selling more goods and services? Of course not. But with Apple failing to hit a home run, and Facebook not leading the charge – our market needs a stimulus and it appears that the French election could fit that bill quite nicely.
“The Tail of 3 Indices – the NASDAQ, the S&P, and the Russell Small Cap.”
Factually, the graph above is a 3-month performance graph of the 3 major indices. The NASDAQ (on the top) is up over 9%. The S&P (in the middle) is up over 4%. And the Russell Small Cap Index (on the bottom) is up over 2%. This is reminiscent of the 1990’s, when people were throwing money at the NASDAQ. I don’t know how long the NASDAQ rally can continue – as it has risen over 300 points in the past 2 weeks. It is highly unusual to see such a high divergence between these 3 indices over such a short period of time. My recommendations include:
- IWM ($139) is the Russell Small Cap index ETF. I’m looking buy IWM on weakness next week as it begins to close the gap between itself and the NASDAQ.
- XLF ($23.84) is the financial sector ETF. If it can close over $24, it could cause the S&Ps to pop to the 2450 level fairly quickly.
- XLE ($67.31) is the energy sector ETF. It rallied on Friday and caused the S&Ps to react positively. Look for it to rise on Monday and Tuesday, and then on Wednesday begin to fall as traders will begin to sell into the rally.
- SLV ($15.50) is the silver ETF. It has been crushed over the past 3 weeks, and between here and $14.50 could be a long-term buying opportunity. If it breaks under $14.50, it will attract buyers.
- SPX ($2,399) is the S&P index product. It has an expected move for next week of anywhere between $2,367 and $2,431. If the XLF and XLE both rally, then the SPX will shoot to the top of its range rather quickly.
To follow me on Twitter.com and on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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