Futures were down 350 when I looked in the wee hours. But since our Trading Model has been cash or short since July 3 this is really “who cares?” territory.
I’d like to thank George Noory for inviting me to spend some time on Coast to Coast AM overnight. As you might expect, just a week on the sleepy side at the moment.
I did want to answer a reader question that I didn’t have time to get into. That was on the outlook for gold.
To get a sense of how things are flowing, you can look at a Yahoo Finance chart of GLD over here.
When I look at the chart what I think I see is an Elliot three waves up, a fourth and then a failed fifth.
From there, gold fell somewhat dramatically and it has a very good chance of returning to some of its former luster if the Fed actually raises rates because an increase in gold seems to come coming along with declines in markets.
This really gets to the heart of what I didn’t have time to get into in too much depth with George last night, but let me explain how I think understand of economics is directly tied to a change in the “Evolution of Business Models.”
It’s really an economic concept of “owning a franchise.”
The concept goes something like this:
In sports, a franchise is basically “rights” to performance of a professional sport in a market area,” the term “franchise” is extremely extensible.
The term “franchise” is what we call a BUSINESS MODEL and it is being widely adopted.
Outside of sports, look at car dealers. How many “mega dealers” have evolved?
A franchise is not when a dealer picks up a single brand. In today’s world, a single brand – like a Ford store or a Subaru store – is not a “franchise.”
A “franchise” is where there is a unifying collection of stores, brands, or stars under the larger “franchise” label.
Example: We do business with Sewell Lexus in Fort Worth when we have any service issues with our old 2005 ES. The car – has over 100,000 miles on it and runs like a top so we take it to a dealer. Well, turns out Sewell Lexus, is just one store under the Sewell FRANCHISE which has multiple locations in the Dallas metroplex.
In fact: They have eight brands in their franchise: GMC, Infiniti, Lexus, Mini, Audi, and others.
So now we have two examples: Sports Teams and Auto Dealers.
A third area is Entertainment.
An example is the the Harry Potter ‘FRANCHISE’ because not only are there hit movies but also product licensing revenue from “official lunch pails” or whatever.
Now that we have three examples, we know there must be a fourth.
How about Politics? It’s no different than a sports franchise.
Except what’s going on in the world right now is the two big political franchises are in TROUBLE.
What had been “McConnell brand” has faltered. Secret Trade Deal vote didn’t help build confidence in that Franchise. And since John Boehner got wimpy and is seen as “selling out” in franchise terms the GOP needs a replacement star player.
So along comes this fellow Donald Trump who already has a franchise – the Independent Rich and stylish franchise. He comes in like Magic Johnson to a pick-up game at the local YMCA.
The problem – and it’s why there are so many republican wannabes – is that the GOP is too dumb because they are only used to playing pic k up ball, the recognize when Magic has just shown up.
The democrat are just as dumb. Hillary Clinton used to have a franchise but the FBI is on this server email case so Joe Biden, sensing trouble in the Democratic Franchise is thinking about stepping in. But the Democrats don’t like turn-over on their team so they are holding on to the sinking Hillary Clintanic.
It is so bad that challenger Martin O’Malley is being quoted in the NY Times as saying that the whole process is being rigged to keep Hillary from meaningful debates:
““This is totally unprecedented in our party’s history,” Mr. O’Malley said. “This sort of rigged process has never been attempted before. Whose decree is it exactly? Where did it come from? To what end? For what purpose? What national or party interest does this decree serve? How does this help us tell the story of the last eight years of Democratic progress?”
So there are some solid examples of how THE FRANCHISE works. And the public seems franchises that we are not supposed to see because of the Internet. We see the Aristocratic Families Franchise which includes the Clintons and Bush’s, which is why there was that strange Hillary and Jeb deal. It’s all marketing and the common wisdom among these political franchise people is that the public is stupid.
Which has what to do with the markets?
What is comes down to is the INVESTMENT FRANCHISE has only one things to sell its fans and customers…and that’s profits.
When the individual buyer looks around they see trouble in all kinds of national FRANCHISE concepts and it makes them uneasy. So they move some of the nest egg out of stocks.
The China Economic Franchise is hurting – had to drop the YUAN – so another start team in the FINANCIAL FRANCHISE is in trouble. Explosions in China. Selling Bonds in China, talk that China is replaying the role of the US in the Great Depression – really stupid talk.
But it all combines to weaken THE FRANCHISE and when people lose faith they do the one thing that assures the outcome: They sit on their wallets and markets go down.
Another Franchise is Global Warming. Al Gore is that franchise but there are other players, too.
Just like there is fantasy football, we live in fantasy information overload and we don’t have to thinking tool and the mental storage unit to drop all these concepts into
So for my Peoplenomics subscribers, I’ve been talking about how to organize all this crap using concepts like Franchise so you can keep the thinking workload small.
Investing is very much like managing a sports franchise. If you want to succeed, you need to get stars on the way up…young enough in their careers that they can grow and well-backed enough that you can make some really good money in the long term.
Why people try to pick out teams in fantasy sports is one of those “beyond belief” areas for me…I just can’t help wonder “Are all these fantasy people rich already? Don’t they realize with the same amount of effort into a time and money sink they could be figuring out the next Apple, Amazon, Adobe, Microsoft, or Tesla???”
Afraid I know the answer to that one.
The bogeyman du jour is Japan which dropped more than 2% overnight, and yet the other angle to it is a Fed official hinted that it’s not out of the question that the Fed could raise rates when they meet in two weeks, so there’s another reason for the decline: Some in-your-face lobbying of the Fed.
In my work, though, I would remind you that the Fed did a series of rate increases beginning early in 1928 and the effect of that was to set off a doubling of the stock market because it literally forced money out of bonds into stocks.
I think there’s a chance we could see that again, but nothing will really come clear until the Fed meeting, though secretly, I think the money would have to be on a rate hike and some back room stimulus to keep the economy rolling.
Raising rates is interesting from another perspective as well, and that’s doing something to counter China.
Regardless, a down day does seem likely after the opening barrage of selling today, but I won’t be worrying about “The Big One” until we first take out 1,812 on the S&^P – stay under it for a few days, and below that, there is major long-term support in the 1,740 S&P area.
If we drop under 1,740, and IF we see volume building and it continues past 1,720, then I would be sitting back getting ready for the “short of a lifetime. Because you can look at the larger wave count in play which would be from the July top of this year down to however low it is we go.
That would be the Elliott 1 down. Then we should have a two up. Not that I would play it, but S&P 2,000 would be a nice number off the 1,812 level or 1,740.
After that? Load the boat on the short side because when things let loose to the downside for the third wave down, which should take us down to the lows of 2009 (and lower) there will be oodles of money to be made if things work out that way.
None of this is financial advice and I’m not going to tell you how I’m playing it…just just remember when options premiums are high, there are still other ways to skin this cat.
That’s how my thinking run this morning as I lumber off to bed after a quick bite to eat.
Sinking the Clintanic
Hillary Clinton emails: Thousands of new pages released. We have better things to do than to rehash this, but remember our discussion about franchises and see the diagrams that follow this morning’s rambling column.
Another 125 classified leaks…where’s the indictment when we need it?
Obama’s Next Job?
After he gets out of office, I think – just based on his behavior here lately (With glaciers as backdrop, Obama uses Alaska trip to push climate agenda) maybe Barrack Obama will be spending time raising money and whipping people up on climate change. Low stress, good cause, lots of time for golf and travel.
Of course, he might take a job at Columbia University, but that might cut into course time, so I bet he’s gonna get a bidding war going somehow. He seems to be better at divisive than uniting. But that’s what politics is mainly: Divide and conquer…look around you for proof of what I’m telling you.
Flotsam and Refugees
Greece has developed its own version of the Mexico border with Hundreds of migrants rescued off Greek islands. A couple of thousand plus in the past days.
Along with all their economic pain, interesting to notice people from Syria and Afghanistan are lining up on the Turkish coast to flood into Europe which is totally paralyzed by the illegals coming in. Correct me if I am wrong on this, but isn’t this the highest pop density of Muslims in Europe since the Moorish Conquest?
And how was Europe after that? We Wiki it:
Differences in religion and culture led to a centuries-long conflict with the Christian kingdoms of Europe, which tried to reclaim control of Muslim areas. In Spain this conflict was referred to as the Reconquista. In 1224 the Muslims were expelled from Sicily to the settlement of Lucera, which was destroyed by European Christians in 1300. The fall of Granada in 1492 marked the end of Muslim rule in Iberia, although a Muslim minority persisted until their expulsion in 1609.
So maybe the EU is planning a hundred years job plan that will give the milbots something to do.
Coping: Around the Ranch
A number of minor nits and notes:
First, Oilman2 has found himself just about an unlimited supply of hot tubs for aquaponics he’s putting in on his spread down the road from us.
Since he is still tied in tighter-than-a-tick to the Oil Patch in Houston, he’s spending weekdays there which lets him pick up used hot tubs.
Hot tub dealers, reportedly, are all anxious to give away used hot tubs.
OM2 then simply drives up to Lowes in Palestine and picks up a bag full of pipe caps, and presto, that’s all plugged up.
Doesn’t take too long with the front bucket on a tractor to sink one in. And then? Well, leave a jet open for incoming water and a jet for outgoing water…
You can even size the pipes to sort by size, I suppose, but they will move the juvenile fish or shrimp from tank to tank.
Pretty slick stuff because at the end of the day, they will end up with a dandy supply of fresh protein (*yeah, I’ll be a buyer) and veggies…and it’s a great system.
Got two kids working the place and so it will be online here pretty quick.
I think I told you about them picking up the remains (and netting) from an old golf driving range down in the Houston area? That will be a huge, enclosed chicken raising area and again, don’t suppose you’d care to guess who may be a buyer?
As for house building, I don’t think I ever posted this before, and if I did excuse the gaff, the hour is later than I usually stay up.
This is OM2’s place in the woods. This is a month of two back. It is all buttoned up now, the sheetrock is in upstairs and there’s an old cedar which runs up through the middle making this something of an oversized tree house, in a sense, but not really (did I mention it’s early?)
The top floor is living space and the bottom floor will be shop and equipment – the stuff that goes with homesteading.
One thing I will be keeping an eye out for in a year or three is if they put in a canning room..
As you may know, some of our friends over in Arkysaw who have prodigious gardening skills actually have a big “canning shed” where all the neighbors come over and can a couple of times during the season.
I figure they may, or may not get to that…I like the seal a meal and freeze, but canning is more energy efficient, for sure.
Award Winning Neighbor
Should mention congratulations to the Other Elaine, the one married to my friend Coy. She won second place for her pickled vegetables at the state fair. Chau-chau is what my Elaine calls it, but she didn’t speak and spell so that’s a guess and grab. I think I got that right, but if not, I have lots of old electrons saved up to make corrections with.
No column on Monday the 7th. I’m taking a day off at sea enroute to Jamaica. Markets are closed to mark my lack of labor and a federal holiday has been declared as well.
Panama can hardly wait for us to leave town and head out for our cruise next week. He and his squeeze will be keeping the two legged vermin at bay. Although there’s not much of it out here. A feller would have to be plum loco to head up a dead-end road in East Texas with no business or invite.\
We’re already hearing sporadic gunfire in the neighborhood, people tuning up for deer season.
The county commissioners are still playing deaf, dumb, and blind (let’s throw in stupid, while we’re at it) on the road situation, though they are watering the dust a couple of times a day (which helps) and there has been something of reduction in gravel trucks. Still, I want my paved road back and no new car until that happens.
Maybe not even then. I might be dead before they get to fixing it. I don’t belong to the crooked division of the good old boys network, apparently.
That’s OK, since someone from this area is likely to be replaced at up upcoming election. If there’s one lesson to be learned from watching the Clinton campaign it’s either think through the paper trail better or outspend everyone.
Had a call from Waylon up at Mags E.R. which is the finest magneto repair and overhaul outfit around. So the air machine should be back in the sky about Friday.
Turns out the Slick Mags (supposedly good for 500 hours) were not in very good shape at 490.5 hours when pulled. So they have been repaired and dialed back in so that and the right flap adjustment and rest of the bullet search should be done before the week is out.
One mag had the start of an oil leak, internal timing was off on the other and the points nearly toast. But that’s why airplanes have these thin protective
layers of money poured on them to keep them safe.
The local airport paving and painting work is done so I can hardly wait to get back up flying since it’s been a while since I’ve landed on an patch with a center line on it.
Someone asked how we were getting along with out Amazon Echo…but I’ll save that for another morning when I haven’t been up all night.
For now, a quick (small) bite and then time to rack out. Melatonin reset tonight and I should be what passes for normal, one of these days.
Write when you break-even,