We got a small and unexpected uptick in the number of unemployment insurance claims this week---so naturally the Wall Street gamblers have been piling into the "risk-on" bandwagon. In the great scheme of things with respect to the actual main street economy, of course, Thursday's figure at 231,000 initial claims was pure noise, and if anything should have been a slight discouragement to stock buying.

But not in Fed World. A tiny trace indication of labor market weakening was taken as a sign that the long-delayed Fed pivot to rate cutting is finally going to materialize!

And we do mean "trace". The dotted black line indicates the four-week moving average of new claims, which has been oscillating tightly around 215,000 for the last two and one-half years. And it hasn't moved at all in recent months. Yet the slight spurt in the weekly figure (purple line) for the first week of May was all it took for the entitled gamblers down in the canyons of Wall Street to conclude that once again they have the denizens of the Eccles Building by the short hairs.

Stated differently, the stock market is so house-trained to drool over any and all Fed actions that even the slightest hint of economic weakness becomes a trigger for the fast money to start front-running the Fed's next capitulation to the Wall Street gamblers. So if any proof is needed that honest price discovery is dead, this week's action surely fills the bill.

Initial Unemployment Insurance Claims, Weekly and Four-Week Moving Average, January 2022 to May 2024



Needless to say, what passes for central banking today is really a perverse form of Wall Street-pleasing monetary manipulation. It employs the vocabulary of central banking, but in practice it fundamentally undermines main street prosperity, even as it showers the 1% with unspeakable financial windfalls.

Stated differently, virtually everything the Fed does for the alleged benefit of the American economy is both unnecessary and a ruse. The Fed has actually become a captive of the Wall Street traders, gamblers and high rollers, and functions mainly at their behest. Not surprisingly, therefore, today's Federal Reserve is a huge roadblock to restoring fiscal sanity, financial sustainability and middle-class prosperity in America.

The proof of this proposition starts with startling historical fact that the post-war US economy did just fine without any interest rate targeting, heavy-duty bond-buying or general macroeconomic management help from the Fed at all. For all practical purposes today’s omnipresent Fed domination of the financial and economic system was non-existent at that point in time.

We are referring to the full decade between Q4 1951 and Q3 1962 when the balance sheet of the Fed remained flat as a board at just $51 billion (black line). Yet the US economy did not gasp for lack of monetary oxygen. GDP grew from $356 billion to $609 billion or by 71% (purple line) during the period. That's nominal growth of 5.1% per annum, and the majority of it represented real output gains, not inflation.

The stock market has been long drastically over-valued owing to the Fed's chronic money-pumping and price-keeping operations. But since the interim low of October 11, 2022 at 3,588 on the S&P 500 the boys and girls down in the canyons of Wall Street have lost their minds completely.

The index now stands at nearly 5,200 or 45% higher. Yet during the interim 18 months what amounts to a planet-wide outbreak of Murphy's law has set in. Nearly everything that could go wrong has gone wrong.

Washington's proxy war against Russia has essentially been lost, meaning that growing desperation in NATO may trigger a hot war with Russia. Likewise, Israel's war on Gaza could explode into a regional conflagration at any minute. And relations with China have gotten so frosty that on his recent trip there Secretary Blinkey found himself greeted by a State Department limo driver at the airport, not even a third-tier Chicom official.

At home, inflation is resurgent, the economy slides toward recession, public and private debt continue to soar, the Congress has become ungovernable and a presidential election  contest between two proven failures and misfits hurtles toward November 5th with "none of the above" clearly in the lead. Indeed, with each passing day the odds of a hung jury in the Electoral College due to RFK's flourishing third-party insurgency means that come January 2025 the War Capital of the world may find itself in a constitutional crisis of epic proportions.

So why in the world would rational investors choose this moment to substantially inflate already way over-extended PE multiples? That is, a year ago the valuation multiple on the S&P 500 already stood at a frisky 18.4X LTM earnings. So had that multiple remained in place the index level would now be at 4200 or 20% lower than today's market.

In dollars and sense terms, the S&P 500 would be valued at $32 trillion today rather than the actual figure of $40 trillion. On the surface, of course, that huge gain makes precious little sense because LTM earnings on the S&P 500 have stagnated at about $225 per share,  even as the macroeconomic and geopolitical environments have dimmed materially per the worries itemized above.

Still, it is no great mystery as to where the extra $8 trillion of market cap came from. To wit, the high-rollers in the canyons of Wall Street have nearly brow-beat the Fed into another capitulation and utterly unjustified round of easy money---so the smart money is simply front-running what they believe to be the Fed's impending surrender.

For want of doubt, consider the recent market cap explosion of a typical tried-and-true trading sardine, which actually serves tacos and burrito bowls. We are referring to Chipotle (CMG), which has seen it market cap soar from a preposterous level of $50 billion last October, where it traded at 43X earnings, to $88 billion at present. That's nearly 68X its LTM earnings.

In recent days both the Biden and Trump camps have come out with guns blaring against the alleged “spoiler” role of Robert F. Kennedy Jr. This has been highlighted by bombastic attacks on RFK from the Donald himself and by similar barrages from the meat-ax welding Dem operative, Lis Smith. Needless to say, these attacks […]

It should be evident by now that the “strong” economy of the last several years was nothing of the kind. To the contrary, the Keynesian GDP accounts were actually inflated by deferred spending run-offs that flowed from the utterly abnormal build-up of household cash during Washington’s pandemic lockdowns and stimmy extravaganza. The story is evident […]

If the monetary central planners in the Eccles Building cared a whit about enabling the workers, entrepreneurs, savers, investors and consumers of America to maximize capitalist prosperity on main street, they’d be worried to death about the collapse of private savings. After all, what lifts an economy above day-to-day subsistence is capital formation. And that […]

We showed in Part 3 that just 1.3 million RFK votes in five Swing States accounting for just 7% of the US electorate could result in a shift of 42 Electoral Votes (27 to Trump and 15 to Kennedy) from the 2020 outcome. In turn, these shifts would cause a hung jury in the Electoral College, thereby requiring a 12th Amendment based selection of the next President in the U.S. House of Representatives for the first time in 200 years.

2024 Electoral College Outcome With 42 Vote Shift In 5 Key Swing States:

• Biden: 264 Electoral Votes.
• Trump: 259 Electoral Votes.
• Kennedy: 15 Electoral Votes.
• Needed to Win: 270 Electoral Votes.

This hung jury scenario very plausibly assumed that neither the 191 Electoral Votes in the Blue Wall states that went to Biden nor the 163 Electoral Votes in the Red Wall states that went to Trump in 2020 would change. Alas, what was not addressed is the outlook for the 11 other Swing States that exhibit a purplish hue and ended in a dead heat in 2020.  

And we do mean dead heat.The 146 Electoral Votes in these 11 states split exactly 73 votes for Biden and 73 votes for Trump. And that was on the back of a popular vote outcome among the 49.5 million total votes cast in these states that was virtually tied with 24,481,800 votes for Trump and 24,252,998 votes for Biden. Our trusty hp12C renders the difference as just 228,802 votes or 0.46% in favor of Trump.

Given the uncertainty of the incidence by which RFK will draw votes from Biden versus Trump, there is a clear risk that Biden could pick up 6 more Electoral Votes or Trump 11 more Electoral Votes compared to the 2020 outcome. Either of these small shifts within the 146 Electoral Vote total for these 11 Swing States would result in a 270 vote Electoral College victory under the scenario outline above, thereby nullifying RFK's "hung jury" route to the White House.

Indeed, the potential for shifts of these modest magnitudes is more than evident in the contrast between the 2016 and 2020 outcomes in these state. In 2016 Trump won 120 Electoral Votes versus Clinton's 26 in these states. So the real danger is in the direction of votes reverting to Trump, not additional gains by Biden.



When analyzed on a state by state basis, however, it boils down to a very targeted risk in three states, which voted for Trump in 2016 and flipped to Biden in 2020. These include Michigan (16 Electoral Votes), Wisconsin (10 Electoral Votes) and Pennsylvania (20 Electoral Votes), along with the 2nd Congressional District of Nebraska, which flipped from Trump in 2016 to Biden in 2020 by a vote of 45% to 52%. The combination of the second district of Nebraska and any one of the three states in this group reverting to Trump in 2024 would put the Donald back in the White House.

In the final section below, therefore, we address how the RFK campaign might attempt to preclude this kind of Trump recidivism. But also it needs be mentioned that the other 7 states plus Nebraska's other 4 Electoral Votes are not likely to shift, especially if the Kennedy campaign gives these areas a hall pass in terms of focused local campaigning and and advertising.

The 16 Swing States of America accounted for 38.5% of the popular vote in 2020, and these 61 million votes, in turn, were reflected in 184 Electoral College Votes or 34% of the total. As it happened, Biden won big in the Swing States, besting Trump by 113 to 71 in the Electoral College. Yet […]

The decibel level from both the Biden and Trump camps about RFK’s alleged “spoiler” candidacy is sure to intensify mightily as Election Day draws nearer. Blocking the election of the other guy, in fact, is about all either of the main party candidates have to offer. Biden’s platform essentially boils down to “Orange Man Bad”, […]

Down on the farm we knew that when the pigs were squealing loudly they were either having an especially fulsome chow-down or the wolf was circling the pen. The Donald’s loud squealing against RFK on social media in recent days is surely a case of the latter. Anti-government conservatives are belatedly abandoning the Donald’s fake […]

Along with the rest of the mainstream media, CNN is so deep in the tank for "Joe Biden" that it should change its call letters to DNC. So its not surprising the network spun yesterday's flaccid GDP number into another attaboy for the puppeteers running the U.S. President's teleprompter---pauses and all.

The US economy cooled more than expected in the first quarter of the year, but remained healthy by historical standards.

Then again, you might wonder which version of history they are referencing. If you look at the the 85 quarters since the turn the century outside of recession quarters, the real GDP growth rate exceeded the Q1 rate of 1.6% more than 80% of the time. And if you scroll back further to the period between 1954 and 2016, the real growth rate averaged 3.04% or nearly double the first quarter result.

Yet what is involved here is not merely a fact-checkers "Pinocchio" owing to blatant abuse of the actual historical facts with respect to the Q1 GDP print. The larger point is that the financial news has become so filtered and distorted by the recency bias of the MSM that the larger truth of the present has been totally suppressed and obfuscated.

To wit, at the core of modern capitalist economies---even with today's so-called technological revolution---is the production of goods for household consumption and business investment. And yet the Fed's own hundred year-old data series on that very matter---the industrial production index---says that the American economy has grown not a single inch since the eve of the Great Financial Crisis

The graph below is indexed to December 2007 =100.0, which is virtually identical to the level posted for March 2024. The real economic story of the moment, therefore, is that even as the official GDP measure continues to pound out tepid gains, the manufacturing, mining, energy and utility producers of the US economy have been spinning their wheels to nowhere for the past 17 years.

Industrial Production Index, December 2007 to March 2024



Needless to say, this flat-lining trend is the very opposite of prior history. The same index rose by 630% between January 1950 and  December 2007. That's 3.5% per annum for 57 years running. And that happened notwithstanding nine recessions, a wide range of Federal fiscal, monetary, regulatory and tax policies that were good, bad and indifferent, and also numerous political crises from the Cuban missile crisis, to oil embargoes, the Persian Gulf wars and 9/11.