I sincerely hope you have many things to be thankful for this year as we begin this Holiday season. Perhaps a new best friend, a new job, success in the markets, a good raise? Best of all, I wish you success in your personal relations with family and friends.
Inflation
I think we are going to see another very good CPI inflation report in early December. There were lots of concerns regarding energy prices because of the Saudi’s cutting crude oil production by 2 million barrels per day. Then karma struck in China.
The Chinese have another new big wave of covid and are invoking their zero-tolerance policy by shutting everything down. They then cancelled major shipments of crude oil from the Middle East, and suddenly there is a global glut of oil in the petro markets. Prices have dropped substantially and very quickly, by almost 10% just in the past week.
Just keep in mind that the Chinese do 25% of all global manufacturing. With large regions of China shut down, that’s means manufacturing crashing to a halt. It may mean more supply chain issues and some bare shelves before Christmas is here. Stock Up!
A Slowdown is Shaping Up
Tech firms in the US are leading the way with many doing layoffs over the past couple of weeks. Intel 20.000 +, Social Media companies over 20,000 layoffs, etc. Google has frozen hiring, but not yet announcing layoffs.
Banks are doing some layoffs, mainly mortgage related. The banks stocks have been down rather sharply this past week, due to interest rate changes. Rates have been coming down slightly (about a quarter point) recently, and bank stocks are reflecting they might soon be seeing loan margin reductions as well as trouble in the real estate/mortgage departments.
Retail is also giving some mixed indications of a slow holiday sales season. The main ones I am seeing are Amazon laying off 10,000 workers 5-6 weeks before Christmas. FedX has shut down 90 offices worldwide, and reduced routes out of China/Asia.
I certainly did not expect either of those events just weeks before Christmas. It certainly raises my antenna in regards to earnings reports for this quarter. Retail sales reported by the government say that retail sales are still holding up well.
Those numbers don’t gel right, and I think Amazon has a better handle on what is really going on with consumers, better data and faster data than what the government bureaucrats are telling us.
The S&P500 appears to be forming a double top at 4020. It looks quite like what happened about 6 months ago. We are about 1/2% below that level now. That to me indicates very little upside in the short-term.
Two weeks from now we will see the November jobs and CPI inflation report, with the Fed meeting immediately following the CPI.
Disney
DIS earnings came in with really bad numbers, and their streaming product, Disney+, had some not encouraging subscription numbers. DIS then fired Bob Chapek and brought Bob Iger back from his retirement as CEO for the past 15 years. I am looking forward to buying back Disney stock when we get to a market bottom in 2023.
Crypto
What a mess! And the news seems to keep getting worse. Reports are coming in that multiple companies in the crypto world are seeking multi-Billion $ capital infusions and nobody wants to throw good money after bad. Allegations of High level government officials taking corrupted money ( I don’t find that too hard to believe.) and appearing that the Trillion-dollar Green Energy programs were more about putting Green in political pockets than truly solving climate and environmental problems.
Major celebrities and sports stars involvement and tarnishing their careers. Several coins and tokens having already lost 95% or more of their speculative valuations. Theft of depositors funds. Wallets being emptied. SBF buying multi-million $ homes for crackhead executives at FTX. There are so many moving parts to this story that it appears more like a fantasy movie than the reality it truly is.
First Three Arrows & Voyager failing, now 6 months later FTX/Alameda and (looks like) Genesis too, among others. Sort of feels like 2008 with Bear Stearns and then Lehman Brothers 6 months later. What’s next? Evergrande taking crypto for Chinese home sales? (I made that up, just being sarcastic.)
Here’s the sad part. It’s real and very painful for the lower level speculators hoping to strike it rich without working or producing anything of value, and it is costing many of them the bulk of their wealth. It is now estimated that nearly 70% of all crypto speculators ever have lost money on their crypto gambling casino bets.
Sam Bankman-Fried is going to end up making Bernie Madoff look like a small potatoes piker. It’s all just so wrong on so many levels.
I think it could be the end of unregulated crypto as governments around the world use it as an excuse to regulate the digital currency, abolish the private “currencies”, and take control of digital currency while imposing fees/taxes (to pay for their regulations, natually).
So the question becomes… what is the next get-rich-quick scheme?
Charts and Video
We are about to head south again in the markets. A double top is forming in the S&P 500 around the 4020 level. Overhead Resistance is getting stronger. I think we’ll see the market peak inside this next week.
The Industrial stocks have shown lots of strength. The large-cap Healthcare stocks are even stronger, but the small-cap stocks in that sector are stinking up the overall sector showing on the StS circle above.
Energy, particularly oil & natgas stocks, are still the best play going into 2023. It’s just been slightly interrupted with the Chinese covid shutdown. That is not a permanent situation.
Video
Have a Blessed and Happy Thanksgiving. I am thankful for your support this year.
Let’s Go Get the Money
or at least keep what we have earned.
JimB