The Morning Line

If you can keep a cool head while everyone around you is panicking, perhaps you don't understand the situation. That's what they say, anyway. It is exactly what we saw last week when stocks barely shrugged even as the shooting war in the Middle East took another baby step toward nuclear conflagration. The oil markets certainly recognized the danger, spiking sharply after our titular president warned that Israeli warplanes might soon start targeting Iran's refineries. Energy quotes scored their biggest weekly gain in years while stocks, although relatively subdued, appeared to consolidate for yet another psychotic upthrust. What seemed to matter most on Wall Street was not the threat of cities going up in flames, but a few meaningless, cooked job stats implying that droplets of juice from America's financial bacchanal have begun to trickle into the parched gullets of gig workers, nurses and cocktail waitresses (if not yet retail clerks). Longshoremen could join them shortly with a 62% raise to $69 an hour, including the union's legendary no-shows.  It's a little late in the Kondratief cycle for them to become rentiers, but the prospect of owning a few shares of Nvidia seems realistic enough. Although keeping up with the Joneses has gotten easier because the Joneses' inflation-adjusted net worth has been stagnant for 50 years, chasing inflation has only grown harder. And that's measured against phony data that understate inflation by half.  Take heart, all you working stiffs: beating inflation is going to be a cakewalk when the next recession brings it down to, like, minus five percent. What About Microsoft? Speaking of recession, this IBM chart, even to the unschooled eye, suggests the Beamer may be about to reverse in a big way. Although I have never tracked the company's shares closely, there may be a few old-timers

Expect stocks to continue their heedless waft into outer space until the election. They would not likely do so if investors even remotely imagined Kamala Harris might win. James Kunstler provided the most succinct reason we've heard for why this is not going to happen:  "The people in this land are finally sick of a faceless blob ruling madly from the shadows," he wrote in the current edition of Clusterfuck Nation. "Mr. Trump has become a national father figure, a titanic offense to a party run by women with daddy issues and to their Marxist allies dogmatically bent on destroying the family (along with every other institution). As it happens, countries need fathers, both actual and symbolic. What a surprise!" So what about polls that show Harris and Trump neck-and-neck in some swing states? Even ostensibly conservative news outlets such as Fox and the Wall Street Journal have been reporting this as though the data were authentic. My guess is that the editors and news gatherers have all been overwhelmed by the nation's left-tilting news media into believing polls that have been massaged with poor sampling, misleading questions and purposeful misinterpretation. In reality, the believers are like the audience assembled on a barge to witness David Copperfield make the Statue of Liberty disappear.  Although some in the audience would swear this happened, it didn't; the barge had simply been repositioned while a curtain was raised to obscure a large swath of the horizon. 8%-10% More Believable Although the magician eventually revealed how he did the trick, the New York Times et al. will not be called upon to explain how they levitated Ms. Harris, since she is going to lose by 20 million votes. That's a realistic number if forecaster Martin Armstrong is right, as he often is about so

The stock market went bonkers following the Fed's first rate-cut since March 2020, but it's more than a little tempting to sell the news. A return to easing had been rumored for the last couple of years, but with a pitchfork mob threatening to descend on the Eccles Building, Fed Chairman Powell finally gave in to Wall Street. The mainstream media has given him cover with the lame story that lower rates will help spur employment. Historians are more likely to recall that the central bank's pivot toward lower rates came at a time when stocks were breaking out to new all-time highs, inflation was ravaging the middle class, and home prices were at record levels. Still, it's an election year, and what did we expect?  The Open Market Committee is simply revivifying the American Dream -- not with a scrawny chicken in every pot, but with renewed hopes of a leased Lexus in every garage. What will lower rates mean? For one, they could conceivably delay a crash in home prices and stocks for a while. It has been coming ever since the 2007-08 deflation failed to finish the job. At the time, one might have surmised that the nation's most popular and pernicious delusion -- growing rich simply by owning a home -- had suffered a fatal blow. Alas, whatever lessons the Great Financial Crash held for us were erased by a turbocharged recovery that has pushed home prices higher than ever. And stocks, too. Although Powell's steadfast hawkishness may have disappointed investors every month for the last three years, it did not impede the stock market's steep rise even slightly. Nor did it quell Congressional spending, which is currently adding $1 trillion of debt to the U.S. balance sheet every 100 days.  Historians will recall that statistic,

The so-called 'wealth effect' is the Tulipmania of this era on steroids, creating untold sums of money from speculative spume. If materializing vast quantities of spendable cash is the goal, a revved-up wealth effect makes the Fed Open Market Committee look like a ladies' luncheon club. Indeed, it can take long months or even years for the central bank to stoke the consumption furnace using swaps, repos and direct purchases of Treasury debt. These obfuscations are designed mainly to make the promiscuous use of credit more attractive to everyone. However, the money must be borrowed into existence for profligacy to work its magic on the economy, and that takes time. There is a much faster and simpler way to inject cash into the system. It works every time, and the result is instantaneous, effectively showering Wall Street with a blizzard of $1000 bills. This is a monetization trick that is not taught at Wharton. An added feature is that even Joe Sixpack can pitch in simply by buying stocks on margin. Turbocharged by a 4x multiplier and a steeply rising stock market, Joe will be driving an Escalade and living in a grandiose suburban home he will never own in practically no time. The chart shows how it's done, satisfying America's money sickness in ways even the financially ingenious Dutch might not have imagined. Their seaborne empire was at its height in the 1630s, when greed and hysteria combined in just the right proportions to make the masses believe a rare tulip bulb could be worth as much as ten acres of prime farmland. The Burghers who invented the open-outcry exchange had the good sense to restrict futures trading in flower-bulb contracts in one crucial way: traders could not sell them short. Shorts Power Bull Markets In contrast, a key

I continue to believe the bull market's fate can be divined simply by paying close attention to price action in Microsoft shares. The company is not only the second-largest in the world by capitalization, slightly behind Apple; it is also the most important. That's because its huge stream of recurring subscription revenues from Windows and the Office suite is all but impervious to economic downturns. This is not true of Apple, whose iPhone sales will plunge in the next recession. So what is Microsoft saying?  We've been expecting the stock to hit 449.42 for more than a month. Although that would be well shy of the record 468.35 achieved on July 5, it would mark a secondary top corresponding to the one that ushered in the 1929 Crash and the Great Depression.  There remains the possibility the implied rally from Friday's low could head into the wild blue yonder after achieving 449.42, but we'll consider this scenario more seriously if and when the stock blows past the target. One thing that makes the wild-blue-yonder prospect somewhat less likely is that the E-Mini S&Ps on Friday breached a key support decisively enough to imply they are headed significantly lower, to at least 5189 from a current 5403.  We should know by no later than midweek whether they are about to drag MSFT lower, rather than the S&Ps being pulled higher by a resurgent MSFT. Whoopee Cushion Bounce In the meantime, some Rick's Picks subscribers may have taken long positions in MSFT over the weekend, since I'd proffered 401.56 as a perfect place to back up the truck and buy 'em hand-over-fist.  When the stock plummeted on Friday ahead of the opening, it kissed that number and Whoopee Cushioned $10 higher before giving it all back by the closing bell.  If the

[I’m taking a summer break, so this will be my last commentary until after Labor Day. It will be the usual busman’s holiday for me, however, and actionable ‘touts’ for popular symbols will be updated ‘round-the-clock as always. Some recommendations will be accessible to non-paying subscribers, so check the home page regularly, especially if stocks go bonkers. I will also continue to provide tradable guidance and timely analysis in the chat room. To sum up the markets for now, though, let me note that the scripted savaging of the lunatic stocks (aka the egregiously misnamed 'Magnificent Seven') unfolded in July exactly as anticipated. Now, I am focused on the strong possibility that the manic bounce that has ensued will turn out to be a sucker rally, a distribution much like the summer binge that preceded the 1929 Crash. Concerning the painting, it is by Geoffrey Leckie and titled 'Restoration of St. Marco'. Geoff and I attended the University of Virginia at the same time and shared a farmhouse outside of Charlottesville. He is a deeply gifted artist whose works, mostly oil on canvas, include landscapes, still-lifes and portraits that have always stirred me with their beauty and uncompromising style. His California seascapes are a particular favorite of mine, capturing the roughness of the Northern California coastline and the ceaseless fury of the waves. Geoff lives in Venice, Italy, but travels the world for inspiration. Here is a link to some of his other paintings and the galleries that represent him. The Venetian scene is thematically tied to the literary text below, an excerpt from Thomas Mann’s magisterial The Magic Mountain. Mann considered vacations essential to restoring one’s vital energy following boring stretches on-the-job. His novella Death in Venice concerns a writer who takes a holiday to recoup his gifts, only to

Bears shouldn't get their hopes too high just because the S&P 500 plummeted for three straight days last week. The selloff seemed tightly scripted, given that the Dow Industrials were rising just as sharply at least part of that time. This is shown in the chart above, which captures price action on Thursday. The implication is that portfolio managers were simply shifting money from one simmering vat to another, an efficient way to keep stocks bubbling without expending much capital. Someday their ingenious siphon pump will be overwhelmed by honest-to-goodness selling. You'll know the weakness is real because it will last for three or more days, it will encompass all of the broad indexes, and it will gain in momentum. Three straight days of selling has been an extremely rare occurrence since this gaseous bull run began in March 2020, just before the covid hoax laid seige to the U.S. economy. But four days? You'd have to go back many years to find an instance of this. Lessons to Unlearn Even the 1987 crash didn't last for three full days. It began on the afternoon of Friday, October 16, but by mid-morning on Tuesday, October 19, selling had dried up and stocks were poised to come roaring back. Bears who were slow to cover short positions got savaged almost as badly as bulls who'd been trapped in the initial avalanche. The downtrend had drawn enormous power from huge open positions in far-out-of-the-money put options. For years, selling them 'naked' was considered a reliable source of free money. But when stocks started to fall hard on that fateful Friday, the ordinarily docile puts turned into a water-cannon enema for short sellers. Traders learned their lesson, and more than a few of my colleagues in the pits of the Pacific Stock Exchange

Stories about San Francisco's death appear to have been exaggerated. I arrived there Saturday for a five-week stay, a getaway from Florida's insufferable summer heat. It didn't take me long to recall why, at age 28, I came to San Francisco and stayed until I was 50. For one, the weather rarely turns hot, even when the rest of the country is sweltering.  And on those rare occasions when a heat wave descends on the city, there is always an ocean of fog lurking just outside the Golden Gate, ready to pour onto the streets whenever high temperatures linger for more than a few days. It was an invigorating 65 degrees when I stepped off a JetBlue plane at SFO on Saturday morning. I'd departed Ft. Lauderdale shortly after sunrise with the thermostat already climbing into the mid-80s and humidity approaching steam-bath levels. Arriving in San Francisco was like encountering the crystal blue ice of a Norwegian fjord. I was greeted by an old friend who has been a player for decades on the periphery of the commercial real estate market. He contends that most of the negative press the city gets is just flackery employed by developers to drive down prices. Not only have they succeeded at this, they have begun to seed long-neglected warehouse districts with large sums of money, turning them into magnets for tech entrepreneurs, residential developers, skilled tradesmen and mostly-Asian workers who earn $300,000 or more per year with their extraordinary STEM skills. So many luxury apartments have sprung up to house these young whizzes that I didn't realize at first that I was in my old Portrero Hill neighbohood, which sits literally on the other side of the railroad tracks, about a mile south of downtown San Francisco. Eldorado's Infrastructure The drive took us

The dog days of summer have returned with a vengeance to Florida this year, especially in my home. The air conditioner's condenser coil sprang a leak, which is hardly unusual considering that it's eight years old. What is unusual, and causing more than a little inconvenience, is that the broken part will take a month for the factory to replace. So far, I haven't been able to determine why the manufacturer, Lennox, would be having such a hard time scrounging up the part. Regardless, if you're in the market for a new cooling system, consider Trane, Rheem or some other brand before you plunk down $8k on a Lennox system that could fail in the intense summer heat of such hellholes as Miami, Phoenix, Houston or Charleston. The interior temperature of my home has continued to rise daily and is now at 91 degrees. There is no cooling it off at night, either, since the air has been soupy, with temperatures only a few degrees cooler than during the daytime. It's an odd time of year for the pace of so many things to be quickening. The stock market, for one. Far from being locked in summer doldrums, the bull rally in the lunatic stocks has lurched into high gear and is being loosely controlled by the one-decision whizzes who manage money. They are not so much pushing shares higher as allowing them to rise on urgent short-covering to speculative heights that in the past have invariably led to disaster. The talking heads say investors sniff Fed easing, finally -- and who could begrudge them a wild display of revelry to make up for their merely festive toga party earlier in the year, after they realized the central bank had no plans to loosen. Six-Three = MAGA High-Fives On the