GUALFIN, ARGENTINA – Stocks ended last week on a low note, after a jobs report showed the smallest gains since 2017.
Larry Kudlow – the president’s director of the National Economic Council – was on TV almost immediately explaining how the low numbers were just a fluke and that the economy was better than ever.
Kudlow could be right; the monthly statistics are all just background noise. But after a few months, you can begin to pick out a tune. The individual stats are nonsense, but the combination, like the notes of a song, often reveals a recognizable pattern.
And what we hear is a familiar tune. Jobs, real incomes, and GDP growth rates are all punky… all typical of the late stages of recovery… neither better nor worse than those of Mr. Obama… and getting punkier.
Meanwhile, the grand climax of the Obama/Trump recovery must be approaching. The whole orchestra is sawing, puffing, and strumming away. And the cymbal player is on his feet, ready for the final smash.
Advance numbers on this Q1 of 2019, for example, are coming in very weak, with the Atlanta Fed estimating a growth rate of less than 0.5%.
Again, a single quarter’s results don’t mean much. We’ll wait to hear the major chords. Our guess is that the last quarter’s GDP growth numbers are likely to be revised downward too… and that a downward, dying finale will then be unmistakable.
No economic recovery ever exceeded 119 months. This one is already at month 116. The audience is getting restless. It’s time to wrap it up.
(Long-term Diary sufferers have learned that our timing isn’t perfect; we tend to rush things a bit.)
Meanwhile, Donald Trump produced his budget proposal yesterday. As expected, it includes a big increase for the military; more money than even the bamboozlers at the Pentagon know what to do with. The New York Times:
President Trump sent Congress on Monday a record $4.75 trillion budget request that proposes an increase in military spending and sharp cuts to domestic programs like education and environmental protection for the 2020 fiscal year.
Mr. Trump’s budget, the largest in federal history, includes a nearly 5 percent increase in military spending – which is more than the Pentagon had asked for – and an additional $8.6 billion for construction of a border wall with Mexico.
So, what do you think, Dear Reader? What is the biggest threat that the U.S. faces? Terrorists? Russia? China? Or, its own lack of financial self-control?
But wait… while you’re thinking about that… we never gave you a full report on our trip to Pampa Grande…
We went off to a neighboring ranch last week just to see how it was managed. It is about 50 miles to the northeast, as the crow flies. But the crows are lucky.
Driving takes six hours, down our own valley, then down another, up another, and over a pre-Andean mountain range to finally arrive in an “oasis” in what is otherwise a desolate wilderness. It is a different world… a vast, secluded valley with thousands of acres of rich farm and grazing land.
“The cattle are so fat,” we said to an Englishman staying there.
He was a cattleman himself, with a spread in Exmoor.
“You think they’re fat? They don’t have any meat on their rumps. You wouldn’t get much for them in England.”
We were looking at crossbred cows, mixtures of Brown Swiss and Herefords. They looked good to us, largely because our only point of reference are the thin cattle on our own ranch, where they have little to eat and have to walk miles to find it.
“We produce sand-fed beef,” we explained. “They eat the grass down so short that they pick up a lot of sand. Wears down their teeth. But the beef is very lean. Low fat. Low cholesterol. Gluten free.”
“Heh heh… do you sell them for food? Or for pets?”
Pampa Grande is a stunning place. It is its own world, with its own climate, its own economy… and a grandeur that is hard to match.
Pampa Grande, the neighboring ranch
On the trail at Pampa Grande
It was once home to the Guachipas Indians, who built their houses with cut stone, much like the Inca. Then, when the Guachipas were conquered by the Spanish, the stones were recycled into houses and farm buildings.
The main difference between Pampa Grande and our place is water. It has water. We don’t. Clouds seem to get stuck in the valley and drop their moisture.
The clouds hang low at Pampa Grande
“Around here,” explained a local gaucho, “water is gold.”
Open to Guests
The ranch is open to paying guests. Since we will have to open our doors to guests too – to try to close the gap between expenses and income – we wanted to see how they did it.
The first surprise was how far it was. We left the highway near the village of Guachipas and then drove for about an hour over the mountains, on a dirt road, to get to the house.
There, after such a long journey, we expected a warm reception. At least a porter to collect our luggage. But there was no one in sight.
The main farmhouse, or “sala,” as it is known locally, is long and low… modest, but substantial… built in the early 19th century. It consists of two courtyards, separated by a narrow central building with a hallway through the middle of it.
Around one courtyard are the bedrooms. The other is framed by the living room, kitchen, dining rooms, and some other rooms of unknown purpose.
We went in the front door. Still, no one. Finally, we found someone in the kitchen who then went to collect the young woman who runs the place.
“Welcome to Pampa Grande,” she said, with a broad smile… and one hand stroking a very pregnant stomach. She is awaiting twins.
She gave us a key and led us to our room, bidding us to park our pickup behind the house. Later, we got together with a small group of English and German guests for drinks in the living room, with a fire in the fireplace and much gaucho and Guachipas paraphernalia – knives, stirrups, funeral pots – arranged on shelves on either side.
An hour later, the group moved to the “comedor” for a family-style dinner.
There is always a risk, when you stay in a place like this, of being stuck with a group of people you don’t especially like. But if you are lucky, the other guests have something to tell you.
What made our trip especially enjoyable was that we found ourselves in likable company. The other guests had traveled extensively and paid attention.
We discovered that we even had friends in common – in Ireland. One worked in the House of Lords. One was a farmer. One had lived in the Far East and worked for humanitarian groups in Vietnam. One was a lawyer for sports stars. And they all had stories to tell.
“You wouldn’t believe how crooked the industry is,” explained a young German. “There’s just so much money in sports. Everything is money.
“A few years ago, you could sign up a player [he was speaking about soccer teams], with a contract that was just a few pages long. Very simple. Now, they’re 50 to 100 pages… covering everything. Endorsements. Doping. Broken legs.
“And you have to think about everything that might go wrong. You get a guy who is a skier. He is sponsored by a telecom company. He goes to the slopes. But suppose there is no snow? Does the company get its money back? You have to think about all those things.”
“The weather is so important to so many things,” interrupted the farmer.
“Big farmers pay for fancy computer forecasts that tell them when to plant… when to put on fertilizer… and when to harvest. Fertilizer is a bigger expense than seeds, for most farmers. You don’t want to put it on and have it wash away. So, the weather forecasters run a computer program that calculates the probabilities… and tells you when to put the fertilizer on. Apparently, it works.”
There were personal stories, too. A wife had dementia. A husband had fallen in a riding accident and was never the same. A child had drowned in the pool… a father drank himself to death…
…But despite these personal tragedies, the group was remarkably cheerful, curious, and good company. What more can you ask for?
TRADING INSIGHT: THE FALL ISN’T OVER
Editor’s Note: Today, an insight from master trader Jeff Clark. Unlike Bill, Jeff is a trader, and he uses technical analysis to determine which direction the stock market is moving.
But Jeff and Bill both agree on what’s most important: A bear market is looming. Today, Jeff shows what the charts are showing him right now, and why they suggest the next move for stocks is lower…
By Jeff Clark, Editor, Delta Report
Sellers took over the short-term direction of the stock market last week.
The S&P 500 finally closed below its 9-day exponential moving average (EMA). That action kicked off some selling pressure. And the index closed down about 2.2% for the week.
Of course, the loss was even larger on Friday morning, when the S&P dipped all the way down to 2722. That was 96 points below last Monday’s high. But, buyers stepped up in the last hour on Friday and cut the weekly loss by 20 points.
That last hour buying pressure inspired hope among some of the financial television talking heads over the weekend. Many of them commented that now that the market has pulled back for a week, and now that some of the overbought conditions have been worked off, stocks are ready to press higher once again.
I’m not so sure.
Take a look at this updated 60-minute chart of the S&P 500…
This is a 60-minute chart – which plots data points on the chart at the end of every hour. It’s a short-term look of the stock market. And, patterns on this chart tend to play out within about five to seven trading days.
This chart defines short-term, tradable trends in the market. For example, each time the S&P 500 crosses its 50-period moving average (MA) (the blue line, which is the 50-hour MA, since this is a 60-minute chart), the index tends to make an extended move in the direction of the cross.
When I showed my readers this chart back in late January, we noted that traders would have done quite well by simply buying the S&P 500 when it crossed above the 50-period MA, and then selling that position and going short when the index crossed back below its 50-period MA.
Last week, this chart crossed to the downside. The S&P is now trading decisively below the 50-period moving average line. It looks like the stock market has further to fall.
While it’s possible the index might bounce back up a bit – just to test the 50-period MA as resistance – this chart looks bearish to me.
We just experienced a 10-week-long rally phase. We probably need to see more than just a one-week decline in order to balance things out.
– Jeff Clark
Why the Job Numbers Are So Punky
As Bill wrote, the recent jobs data is “punky”… and getting punkier! What’s behind it? According to Fed Chair Jay Powell, too many American workers are hooked on drugs…
A Nation of Renters No More
Many predicted the U.S. was waving goodbye to the white picket fence to become a nation of renters. But, new data shows the decade-long decline in homeownership rates has abruptly reversed. What’s behind this reversal? It might have something to do with those millennials…
This Is the First Serious Threat to the iPhone…
Consumers are holding onto their smartphones longer… the newer models simply aren’t innovative enough to compel consumers to run out and buy them. Not to mention, they’re expensive. Bill’s go-to tech expert, Jeff Brown, shows why the “something big” we’ve been waiting for in the smartphone world is finally here… and why that spells trouble for Apple’s iPhone.
In today’s mailbag, the debate continues: Is socialism good for the U.S.?
I cannot believe the absolute moronitude (yes, that’s a made-up word, but it fits) of some of your readers with their take on socialism… So if we don’t like socialism, we shouldn’t accept Social Security? Fine – I’d be perfectly happy to forego SS when my time comes, so long as the government sends me an inflation-adjusted refund check for all the money I (and my employer) have paid into this Ponzi scheme for the last 40-plus years. Public Education? Why, yes – include me out! I’d be happy to save thousands of dollars per year that I pay for educating/indoctrinating other people’s kids.
And how is the military “socialist”? Our constitution specifically authorizes the federal government to “provide for the common defense” of our nation – pretty much like every other country on the planet. And how are police and fire departments in any way, shape, or form “socialist”? For starters, they are not part of the federal government, nor of any state government. And unlike our federal government, they provide a benefit for everyone within their communities, as opposed to a select few. God save us from such massively ignorant people!
– Mark H.
There is no “socialism vs. capitalism.” Nationalization of the means of production exists almost nowhere (i.e., socialism). Neither do free markets, unimpeded by government intervention exist (i.e., capitalism). The economic system that exists in nearly all nations should more properly be referent as “fascism lite” – wherein, exists a duopoly of power held by government and corporate influence – where property is nominally privately owned; but what is produced, how much, and by whom is significantly directed by government regulators for the benefit of politically connected large corporations.
The only solution is the actual free market – eliminate the power of government to grant favors to any economic players so that those who succeed economically are those who have provided consumers with what they want. The other alternative – actual socialism – is everywhere and always a failure at producing what people need and that failure is compounded by the evil of its freedom-hating basic premises – that government bureaucrats be able to dictate what is allowed to be produced.
– Marlow M.
Dear Bill, I absolutely share your disdain for politics and the desire to be left to do your thing without government interference. But you know full well that is as much a dream as AOC and that Frenchman’s proposals. So, instead of being so bitter, let’s suggest to make the best of it, rather than knock down any effort to fight the Deep State, however imperfect the attempt. After all, they have ruled forever and it takes more than one man and two years to make a dent.
– Erich K.
Bill… Bill… You say that if the working stiffs ever realize that the rich are getting richer at our expense because the debt is piled on our shoulders, there will be hell to pay. We have realized it! Why do you think that Alexandria Ocasio-Cortez won a seat in the House and did so in such a dramatic fashion – by defeating a moderate Democratic incumbent in a primary challenge? Why do you think Bernie Sanders is running for president, again? Why do so many people look so favorably upon socialism? The hell has already begun and it’s just getting started. The worst is yet to come.
– Dale A.
And a couple of readers bring it back to Bill’s comments on President Trump… Is our editor “committing treason”?
You don’t know what you are talking about. You are making suppositions that are not true. We need honest trade deals so everyone involved gets a fair shake. People like you hate the president and talk against him to incite others. You are committing treason.
– Janet M.
Bill… Trump is certainly not perfect, but he is a lot better than Hillary would have ever been. We have created so many problems that need attention, as well as mountains of money to correct. Who out of the candidates that ran with Trump could do better? Who do you know has the energy of Trump and the will to battle the Dems day in and day out? Please try and find something positive to say about our president, will you?
– Douglas B.
IN CASE YOU MISSED IT…
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