COT 27 – Chaos in Israel, More Chaos in Washington, and A Boat Load of Economic News
Jeff Kikel: Hey, everybody. Welcome to the sense of things. It’s Jeff and Ron here once again,
and we are kicking off another week. A lot of craziness that’s
happened during that time period. Of course we’ve had the actions happening
in Israel. We’ve got some economic stuff we’re going to talk about today.
Jeff Kikel: We’ll get a little bit, Ron’s got some stuff on the markets
that we’ll talk about. And we’ve got an interesting pop culture thing to talk about.
Ron Lang: Ron, how are you doing, bud? Morning,
Jeff. Good. Other than international news. You’re right. It’s a slow week,
despite the fact that had a couple of economic was the PC came out and CPI is coming out today.
Ron Lang: Tomorrow. I’ve got a
Jeff Kikel: slide on that. That will cover PPI and CPI.
Ron Lang: Yeah. So we’ll talk about that. But other than [00:01:00] that,
not much is going on. I think a lot of people other than what’s going on in the Middle East.
I think a lot of people are waiting on corporate earnings, which so far have not been too bad,
even though some have been retrenching some employees, but nothing on a mass scale.
Jeff Kikel: And I think, as we’ve discussed with previous. Quarters. It seems like they’re
now ahead of time guiding down pretty significantly coming into these so that
the earnings reports actually look like, they’re in line or surprises at this point.
Ron Lang: I hear you. What do you wanna say?
Ron Lang: You wanna start with your pop
Jeff Kikel: culture? Why don’t we start with the pop culture piece and this is,
you being a Philadelphia Phillies Absolutely. Philadelphia native. Red October. Yep. Here’s a,
here’s what could have been more red October. A Philadelphia Phillies fan this week tried
to get into the game with what he was calling a service animal, which was actually an alligator.
Jeff Kikel: So it is an emotional support alligator.
Ron Lang: So let me ask [00:02:00] you, what’s wrong with this?
Jeff Kikel: Yeah. I remember my Dallas Cowboys going to Philly’s games and, the fans balling up
batteries and and snowballs and throwing them at the players. But this is a whole new one for me.
Ron Lang: I did that to Jimmy Johnson and the Cowboys about 35 years ago. That was
it. What, which is another reason why they stopped selling beer after halftime. Yeah.
Jeff Kikel: The thing I’m trying to figure out here is it’s Philly. I, maybe if this was Miami,
I could figure this out. I could see an emotional support alligator, but I’m just guessing.
Jeff Kikel: I just don’t know where he got the alligator.
Ron Lang: I think this guy needed attention. I probably didn’t even have a ticket for the game.
Jeff Kikel: And the good thing is nothing. Nobody actually put
him on any news channels that I could see. It was just this one little post.
Ron Lang: It had to be a joke. That’s, that’s all it could be but it’s funny.
Jeff Kikel: I love it. Interest me. So a couple things on the on the economic front [00:03:00]
yesterday. So once again, really quiet week. I think probably the only thing I saw other
than these couple things I’m going to cover mortgage applications were up a little bit,
which, we’ve had the kind of flight to safety where people are buying us government bonds.
Jeff Kikel: And that’s pulled the 30 year or the 10 year rates down and got people going.
But this week, I think the biggest. Shocker. I think for a lot of people was the the PPI,
which came in, consensus was 0. 3 and it came
in at 0. 5. So it was way at the top of the consensus range. So year over
Ron Lang: year was out of range
Jeff Kikel: too.
Jeff Kikel: Yeah. Significantly out of range for year over year. And this, it was 2. 7 percent X
food and energy, which energy prices have been way the heck up. Yeah. In year over year with
energy and trade services in their ex food, energy and trade services up 2. 8%. Once again,
we’re seeing these kind of numbers were, producer price indexes are [00:04:00] way up.
Jeff Kikel: And if you looked at CPI this morning, CPI came in above consensus and
way the heck at the top of the range there again. It was within range of With the year over year,
but the month over month was way at the top of the range. That still gives,
I think the fed the ability to say, hey, this is not under control.
Jeff Kikel: And we’re going to continue to have to be vigilant and tighten.
Ron Lang: There’s no doubt. This gives them essentially the green
light for another quarter point rate hike, whether it’s November, December,
but there’s no doubt is this basically gives them the green light to do that. I can’t imagine that
another number is going to come out next month and it’s going to be significantly different.
Ron Lang: All this is still riding their trend of higher for longer. But I think 1 more rate
hike. And let it lie until Q1, see if there’s any drastic effects and go from there. I just,
I don’t see anything [00:05:00] different at this point. Yeah.
Jeff Kikel: And I think, it’s going to be interesting to see
how the situation in the middle East, if it gets out of control.
Jeff Kikel: If more people get involved, I think it’s a foregone conclusion that
Israel is going to go in and just completely pound on Gaza and they’re
going to eliminate them. Yeah, it doesn’t you have to, these are animals. And you’re
going to have to do that. But how does that then affect all the relationships?
Jeff Kikel: The
Ron Lang: problem with insurgents and that is they’re not wearing uniforms,
right? They’re wearing street clothes. So how do you decipher who’s somebody
good and who’s somebody bad? I have no idea. But look, Hamas doesn’t have any
manufacturing resources. So they got the missiles and the ordinance from somewhere.
Ron Lang: Yeah, and there’s only one of three, maybe four places they could have
gotten them. Let’s say it’s not China. It’s either Iran, Russia,
North Korea. That’s it. Yep. And Iran has been known to finance them and Hezbollah and
whoever. So if they do link it [00:06:00] back to Iran, sanctions, aren’t going to work this time.
Ron Lang: Actually that’ll work ever,
but they’re certainly not going to work with them. So what, what’s the, what’s
Jeff Kikel: the ripple effect here? Yeah. And I think what’s the ripple effect amongst
the Arab community and everything else. They’re, they’ve been working for so many
years on the Abraham accords and starting to pull, pull some coalitions together.
Jeff Kikel: And how does this break that up and throw it off track, and we get back to,
we get back to status quo that’s been for the last 50 years. In the region of that
just destabilized environments and, the us against them. So I think that’s going
to be intriguing to see how that affects. We’ve seen the market up and I know you’re
going to do a little piece on, the market and what’s been going on with the S and P.
Jeff Kikel: It’s been shockingly up this week and I would have never
Ron Lang: expected that. I agree. So let me get into a few slides because
my last slide is talking about the S& P Yeah,
so this just came out [00:07:00] this morning. We had an 8. 7 increase in social security this
calendar year They now announced it 3. 2 for next year, which is still You know above the
norm because in the past it was always either around two percent or zero So to get an 8.
Ron Lang: 7 one year and 3. 2 the next year That’s a pretty good bump I mean if you’re on
a fixed income and unfortunately if you’re only relying on social security You need every basis
point jump for yourself And on the bottom there. I thought this was just interesting
because what does that really mean? The average estimated increase is about 59 bucks a month.
Ron Lang: So maybe a gallon of gas for a midsize car I don’t know but okay yeah,
it was it was a little 529. I filled my car up yesterday. It was brutal Arizona
just surpassed california as having the highest average gas prices About a week
or two ago. I don’t know where it stands now, but Whatever it is, it ain’t good.
Ron Lang: I know in Texas, it’s [00:08:00] probably the
Jeff Kikel: cheapest. I filled my car up yesterday for 2.
Ron Lang: 89. Sorry. 289. Are you sure you don’t have a decimal point problem there? No,
Jeff Kikel: It’s 289. Yeah, it was and I did it at a place where I don’t get a discount. We have
a grocery store that we shop at that gives us credit every time we buy right for gas.
Jeff Kikel: And, I had, I filled my truck up a couple of weeks ago
and it was a dollar off. So I think I filled up for a dollar 89. That’s funny.
Ron Lang: All right. So that’s social security. Let’s move on. So I know we
have talked a little bit of, or at least I have to add nauseam about our debt. No,
no politician is talking about how the, how do we cut this thing in half?
Ron Lang: Here you go folks. Forget about all your all the social BS issues for the
election. Here’s the problem. Here’s the biggest problem of them all. This is what’s
causing inflation. This is what’s causing a lot of problems. And this is what’s also
going to [00:09:00] create a higher poverty. We’re spending more on just paying interest.
Ron Lang: Are dead than what we’re paying for national
Jeff Kikel: defense. Yeah. And that I’d seen something about two months
ago that was saying this was going to be like 2035 when this happened. And
all of a sudden now it’s got shot forward to here.
Ron Lang: Here look at the bottom sentence, 2 billion a day.
Ron Lang: And just interest.
Jeff Kikel: Yeah, we’re having to fund, now helping out Israel,
which we should, but we’re helping Israel. We basically got a blank check written for,
brain and we’re just plowing money out left and right. Not to mention
what we’re doing internally, but it’s, that gets, starts to get scary here,
Ron Lang: It does. And it’s look, I don’t have the answer. And even if I was a, even if I was
a politician, I had the answer, nobody would listen. Yeah. [00:10:00] They’re too focused
on trying to kill and destroy each other that this is what’s going to probably end up killing
and destroying the United States. This is what’s going to end up killing our reserve dollar status.
Ron Lang: If we can find a way to halt and reduce, not just halt, but we need to reduce it. And look,
raising taxes is one way cutting spending is another. But when you got the top,
cost being. Social security military and, other entitlements where do you cut? Where do you cut?
Ron Lang: And I’m not, I look, I don’t have the answer, but I need to write, I’m just putting
this out there to raise attention more because. Some politician look,
they’re not going to make it their number one factor because they’ve done all their
polls and studies and surveys, and this is not top of mind to the average person.
Ron Lang: Now, the average person is trying to pay their bills. If you think about it they’re
trying to do what the United States is trying to do. They’re just trying to,
they’re just [00:11:00] trying to get to the next month. It’s
Jeff Kikel: sad. It’s sad. Basically what we’ve done as a country is basically what
a lot of people have done, which is they’ve charged up their credit cards
and now the credit cards are up in the 26 percent range, credit cards,
Ron Lang: there’s a credit limit, our debt limit,
which is going to come up again next month and that you thought it was a bloodbath last time.
Jeff Kikel: Yeah. Oh, it’s just, like I said and, you’ve got people that are just not going to budge
and nor should they. Somebody’s got to stop this at some point in time. And, I think what we have
to do is investment advisors is we got to, we always have to think ahead of what’s happening.
Jeff Kikel: And sometimes it’s hard to do when you’re looking at, okay the market just keeps
going up up and up. And, how do we plan ahead for that future, that eventual future that You know,
we know is going to have, it’s going to come to roost at some point here. I
Ron Lang: agree. So this is just something else that was interesting.
Ron Lang: I’ll leave this up for a minute. We’ll look at it. [00:12:00] We’ll talk about it,
but this is talking about who owns our debt And you know some of the big countries have sold it
off in the last couple of months, which is what drew has driven yields quite a bit higher. Yeah.
But I just think it’s very interesting that foreign governments and private investors
are one of the biggest holders of public debt owning 8 trillion of the 33, right?
Ron Lang: Which is 25%. I don’t know how this is sustainable. This is frustrating.
Jeff Kikel: You just don’t, yeah. Okay. So that’s 8 trillion out of
33. Who’s going to who’s going to be the one that rescues it when,
it just keeps ballooning up if these foreign countries are like, it’s not so good
Ron Lang: and they can’t keep printing money.
Ron Lang: That’s the solution to everything. And it’s not going to be,
I don’t know how reserve currency actually gets taken away from you,
but maybe it’s when you can’t pay this debt anymore. I don’t know. I don’t
know. [00:13:00] All right. So my last slide here, and I clean this up a little bit. So for
those people out there that are not technical or don’t understand technicals let’s just go by this.
Ron Lang: This is as of an hour ago. Yeah. So the blue line is the 50 day moving
average. This is where traders will trade along, right? Whether it hits up against,
or if, as a resistance or hits it on the top side. For support,
the 200 day is really what you want to be more concerned about because this is institutional.
Ron Lang: This is where the, the big companies, the big boys,
the big girls out there are looking to say, hey, when it gets down to a certain level,
it’s stronger support. When we had that pretty nasty pullback in the last month in September,
all right, we went down to. The 200 day we pulled down above this was the job report on Friday,
which I think shocked a lot of people because it wasn’t great.
Ron Lang: So you would think that, wait a minute, that should be one
of the [00:14:00] recession signals saying we’re going to have. Higher unemployment,
right? Maybe they’re looking at higher unemployment means,
okay maybe we’re at the end of the rate height cycle. Now they’re going to start to lower rates.
Ron Lang: I don’t know the mentality. All I know is they use the 200 days support. Look
what happened in the last three days. , it bumped up against the 50 day. So my little thesis here
is that I think the, these bands, the two, the 15 to 200 are gonna narrow, the stock market
will trade within that band. And then one of two things is gonna happen in late November.
Ron Lang: If we get the debt, if we get the shutdown averted. One thing,
one of two things are gonna happen. It’s gonna pop like a coiled spring to 52 20 and end the
year. Or we’re going to pull down to the 50 to 4, 100, 4, 200 level. I don’t, I’m sorry. The 4,
100 level, I think is more realistic. We’ll have to see, but you know what folks, technicals.
Ron Lang: Don’t lie, right? [00:15:00] Because the next resistance line up here is this trend
line here which is around the 4400 4450 level. We’ll have to see, but I think
that the technicals tell a bigger story right now than a lot of the economics because We all
know that two thirds to three quarters of the trading that’s done is done by computers, right?
Ron Lang: All those algorithms out there and they’re trading on technical levels. They’re not,
the, these algorithms aren’t trading on fundamentals. They’re not trading
on economic factors. They’re trading on technical levels. What are your
thoughts on this? I don’t know how often you follow technicals.
Jeff Kikel: I am a big technical guy. I typical, I typically do it more off of the individual
securities that we’ll, we’ll hold, but yeah, I agree with you. I think it’s intriguing to
me to see how fast this trend snapped back. It was pretty much a pretty straight downward
trend there for a while, and then all of a sudden it just snapped back like crazy.
Jeff Kikel: Which typically [00:16:00] means,
from my perspective, you see a little bit of profit taking. Happening, but, do we bounce
off that 50 day and bounce back down to the 200, and just keep this. Wave back and forth,
I personally think that’s where we’re going to be for the next several months.
Jeff Kikel: I don’t know if we’re going to. I don’t know if we’re going to shoot to the
high side, something dramatic is going to have to happen there. But I personally,
I think what is happening is. Everybody is so hyper focused on what the Fed says.
And if the Fed says, okay, we’re done for a while, at least there’s some certainty there.
Jeff Kikel: And then it’s going to be okay. What,
6 months down the road. Do you feel like they’re going to start lowering interest
rates? And then the market’s going to basically have a big guess. At
Ron Lang: that point the fed futures market is indicating Starting I think it’s july next year
It’s not over 50 But I think june july and august next year is [00:17:00] about a 40 to
45 percent or a lower percentage that’s when the first rate cut may be remember we were talking
about this three months ago, people were talking December, which was ludicrous, but now it’s pushed
out the next summer, which kind of makes sense because the lag effect here, so we’ve already
seen it, it just hasn’t affected employment, employment, when it affects employment.
Ron Lang: That’s when the cards will drop. But until then, strong, it
Jeff Kikel: seems. Yeah. And I don’t think the fed governors have been tight lipped about this.
I remember I’ve, I heard Neil cash, Carrie the Chicago fed head of Minnesota or Minnesota. He
talked about this. 6 months ago. Yeah, he was like, hey, it’s going to be higher for
longer and until we see unemployment start to come down, that’s, we have to keep vigilant with this.
Jeff Kikel: We have to keep these rates higher for longer. So I
think the reality comes a [00:18:00] little bit of the craziness out there,
regardless of where interest rates are today, at least some of the craziness might calm the bond
market down a little bit because that, like I told you, before we got on, I had a client
come over from another firm where they had been holding, basically been holding a portfolio of.
Jeff Kikel: Bonds and a portfolio of bonds, largely a conservative portfolio coming in and
the thing was literally down 29 percent some of the positions. Down 29%, that’s insane,
this has not been a place you could go. And hide and say I’ll just buy bonds or whatever.
Jeff Kikel: You’ve literally had to hire have cash. Over the last year, unless you were in the
Ron Lang: stock market. And it’s amazing that he was down that much because the market was down
22 percent last year. The bond market did have a recovery this year. But then again,
with yield spiking the last four months, he could be there, but the fact that they
didn’t make any changes, other than set it and forget it, [00:19:00] it’ll come back.
Ron Lang: It’s ridiculous.
Jeff Kikel: Not so much. But, like I said, I think it’s been an intriguing couple of years. And if
you weren’t in those 7 or 8 stocks that were really running the show. If you look through
a little bit to that, the S and P yeah, we’ve had this big pop up. But once again, it’s been those.
Jeff Kikel: Eight to 10 stocks that have really driven everything and they’re driving it again,
you’ve seen Facebook and alphabet and all those up But if you were
to look at the equally weighted index, it’s down for the year.
Ron Lang: Yeah. Yeah again we’re about flat on the day today. Yeah, but you’re right.
Ron Lang: I think it’s going to be employment And it’s going to be those top stocks that that
that’s going to be your canary, but right now it’s long and strong. It seems got to get past
that 50 day and we’ll see what happens here up. I think, things may moderate to say a wait and
see between the government potential shutdown next month and what happens in the Middle East.
Ron Lang: And if either 1 of those [00:20:00] truly get worse, for lack of a better way
of saying it. I think we’ll get our, I think we’ll get our factor here. Where
the market’s going to go by the end of the year next year. Who the hell knows, but yeah.
Jeff Kikel: And it’s going to be crazy next year because we’re going into a,
probably a pretty contentious.
Jeff Kikel: Presidential
Ron Lang: cycle, pretty contentious. It already is content.
Jeff Kikel: That’s true. But it’s, it gets worse as we it hadn’t got worse yet. It’s going to get
way worse, as we roll into next year. I would say a lot of opportunities for up and down
and craziness, and, I may need my emotional support alligator before it’s all over with.
Ron Lang: I’m going to go for the peacock because somebody tried to
bring that on a plane about a year ago. I think that might be more interesting,
quite frankly. At least it’ll be more colorful if it gets angry.
Jeff Kikel: I’m thinking so. I’m just thinking that I’ve
already got somebody sticking their feet through the seat and things like that.
Jeff Kikel: I can’t imagine a peacock getting hit by peacock feathers while on a plane.
Ron Lang: It’s insane. I hear you. We’ll have to
see how things pan out over the [00:21:00] next week.
Jeff Kikel: Awesome. Folks, thank you for being on. We do these shows for you as always. So
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So thank you for watching and we will see you back here the very next time.