Out-Of-Control.

Out-Of-Control.

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Congress developed and the President signed a bloated bipartisan two-year spending deal, loaded with “pork” and lauded by Trump as containing money for jobs and more than the military asked for. The massive $600+ billion bill includes increases in both defense and non-defense spending, for both 2018 and 2019—conveniently moving the next possible spending confrontation past 2018 elections.

It adds $320 billion to the deficit over the next 20 months and sets the stage for another $1.8 trillion in deficits over the next decade.

Rand Paul was widely criticized by swamp creatures for trying to force some budget accountability. In my opinion, Trump holds the view that our budgetary deficits will never be paid off, so might as well direct the money toward causes/projects he considers worthwhile.

Unaffordable Care. Insurer participation and competition in Obamacare declined again in 2018 at both state and county levels, according to a Heritage Foundation study. This year, the number of counties with only one insurer offering coverage increased from 33% to 51%. Departing providers are reacting to Trump Administration policies, especially the removal of an individual penalty for non-participation. With healthy young individuals now able to completely waive coverage without a penalty, rate increases are going to accelerate.

If you are the employer of a healthy group (or work for one), you need to look into self-funded plans. You can start here.

Finally: a correction! Five trillion dollars were wiped from global stocks last week--$3 T of it in U.S. markets. The slide triggered record outflows from equity funds and a possibility of the Dow falling below 20000 before reversing. Markets should consolidate next week and continue moving lower into March. A close below 22440 will signal a very good chance of closing below the 2016 low at 19678. When the dust settles, the Dow should resume its ascent, as foreign safe-haven investors pile in, and head for 40000+. The turn could be sharp.

Overtaking America. Amazon is allowing no dust to gather, following its foray into brick-and-mortar groceries— where it’s begun 2-hour home delivery of Whole Foods orders in four test markets (Dallas, Austin, Cincinnati and Virginia Beach, VA). It now plans to launch a “Shipping with Amazon” service that will pick up packages from businesses and ship them to consumers—directly competing with UPS and FEDEX. The new program will start in Los Angeles, then go nationwide. Amazon also runs a dominant cloud-computing services division, a Hollywood studio and a massive marketplace and logistics operation for sellers.

Global un-warming. Tuvalu is a Pacific island group often cited by climate alarmists as immediately at risk from rising sea levels caused by “global warming.” A new University of Auckland study examining geographic changes of Tuvalu’s nine atolls and 101 reef islands between 1971 and 2014 concluded that total land area has increased by 2.9%. Tuvalu is RISING, which is consistent with an hypothesis that we’re entering an age of global cooling … which implies, among other things, future migration of individuals toward the Equator.

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MARKETS – for the week ending February 9

Real money eased lower: Gold dropped $21 to $1316/ounce and silver closed down 57-cents at $16.14/oz. Gold’s weak performance amid last week’s stock market turmoil confirms its weakness, but a rise in the gold/silver ratio back above 80 is a potential sign of an approaching bottom.

US stocks navigated Hell Week, with the Dow trading back and forth over a 22,000 point range before settling at 24191, down 5.2% and its worst week in two years. The S&P closed down 5.1% at 2620. Markets in China and Hong Kong were the hardest-hit foreign markets.

Mining stocks (the XAU Index) plunged 7% to 78.35.

Crude oil (the WTIC Index) tumbled $6.25 to $59.20/barrel. After a several year delay, China announced the March 26 launch of a yuan-based oil futures contract — a move that could shake up pricing of world oil markets.

Ironically, Goldman Sachs had issued a “most bullish in a decade” call, just before oil crashed.

Commodities (GCC Index) continued falling, closing the week down another 2.2% at 18.98, and now heavily oversold and leaving a gap to be filled.

US Treasury bonds were mixed: the 10-year yield dropped one basis point to 2.83% and the 30-year yield rose 6 bp to 3.14%.

Currencies. The Federal Reserve Note (= dollar, via USD Index) attracted safe-haven attention from individuals fleeing stock markets, and finished up 1.4% at 90.33.

Cryptocurrencies. Bitcoin plunged to $6000, then recovered to close at $8438/coin, down $163 after another wild week.

To stay current on cryptocurrency developments, email us at [email protected] to get your free copy of our latest weekly update (published on Wednesdays).

About the Author

Wayne Peterson is President of Wayne Framework 2, LLC, author of “But What If I’m Right?” and publisher of the Transformation Watch newsletter and weekly Crypto Analyst Newsletter. For free weekly receipt of these financial blogs, subscribe here.


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