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THE REAPER MARKET COMMENTS
Prepared by R.E. McMaster, Jr.
General Market Comments
Swirling, unstable, unsettled, ungrounded these are the words that aptly describe the climate and weather now. Climate/weather is a primary influence on one-half of the economic equation-land. (The other half is labor.) Climate directly affects the economy of 75% of the world's population, including such volatile countries as India, China, Korea, Iran, and Russia, some of whom we depend upon for critical natural resources. And now it's shaping up that we'll have an El Nino. This raises the chance of a coffee-killing freeze in Brazil in July and August to 60%. Although the grain-growing conditions in the U.S. bread basket should be excellent this summer, it increases the risk of a wet fall during harvest and an early frost. Moreover, fully 35 of the 48 contiguous United States have been declared disaster areas due to wild weather. This has impacted me directly. In Montana we had record snowfall followed by headline-making record floods this spring. Now, just this past weekend in Texas, we had 21 inches of rain with floods that caused death and destroyed homes on the river/lake where I live. The water came up over my diving board! Just a few weeks ago, the F-5 tornado that destroyed Jarrell, Texas, was literally less than 30 miles as a crow flies from our office. The rest of the world is not as calm as we have been (so far) when such weather upsets hit. Confrontations between the Palestinians and the Israeli troops on the West Bank continue to fan the fires of war. Iran, which has cruise missiles that can be fired from air, land or sea, threatened to close the Straits of Hormuz in May, through which one-fifth of the world's oil passes. U.S. Secretary of Defense Cohen has been beating the war drums between the U.S. and Iran. This is coming at a time when the U.S. is importing a record amount of crude oil, hitting 9.391 million barrels a day during the week ending June 13. Hostilities are also picking up along the soft underbelly of the U.S., the U.S.-Mexican border, where U.S. troops are being considered for deployment in the border drug war. And, the U.S. black community is upset over Dexter King's (the son of the late Dr. Martin Luther King, Jr.) statement on June 19 that U.S. federal officials, including LBJ, conspired to kill his father. In a different vein, the U.S. federal debt ceiling is now $5.95 trillion. Reminding us who owns the mortgage to our economic good times, Japanese Prime Minister Ryutaro Hashimoto spoke candidly, "I hope the U.S. will engage in efforts and in cooperation to maintain exchange stability so we will not succumb to the temptation to sell off Treasury bills and switch our funds to gold." How's that for a rumbling ahead of our upcoming projected major turning point low for gold and gold shares by October of this year! Isn't it enough that bonds are already yielding four times what stocks are yielding, 6.7% versus 1.6%. The S&P 500 is approximately 17% overvalued compared to bonds. Then there is the specter of deflation sneaking up on the economy according to Imtrac. The leading indicators for the economy have effectively been in a downtrend since 1992. So we have been in the equivalent of the plateau period of the Kondratieff Wave. Retail sales fell for the third straight month in May, the first time this has happened since 1981. Consumers are starting to buckle under the pressure of a record debt burden. The copper market, an economic indicator, has fallen out of bed. In May, the PPI dropped for the 5th month in a row. This is the longest drop in prices since 1952. Prices of crude goods, crude energy, capital equipment, crude foods, and intermediate goods have all fallen off sharply. And then there is all this alien stuff that always manifests when the masculine/yang/grounding/individual influence has been severed. Exactly one year since the last hit alien invasion movie, Independence Day, we find the June 25 U.S.A. Today featuring the next projected smash alien hit movie, Men In Black, starring superstar Tommy Lee Jones and Will Smith. Sensationally, too, on June 13 in Arizona, people in Phoenix and Tucson saw amber/orange lights hovering above the city and swamped telephone lines with calls reporting UFO activity. There is an interesting correlation between this UFO-type of thing and earth changes following soon. Also in the news is the U.S. Air Force's official statement that the "dead aliens" discovered at Roswell, New Mexico, in 1947 were really "test dummies." Personally, I think the test dummies are military intelligence, an oxymoron if there ever was one. Frank Kaufman, a retired government intelligence agent who was in charge of investigating the Roswell incident, now an 81-year old gentleman, stated, "I'm sure I saw those aliens." Kaufman quipped that no one would go to the trouble to put eyebrows and wigs on test dummies. So why are all these federal officials converging on Phoenix? For nothing? And what about the Mars probe? And what about my turning points dovetailing around the weekend of July 19? The best evidence I've been able to obtain suggests the U.S. government has had anti-gravitational flying devices since at least 1947. Heavens, at the Global Science Congress in Tampa, Florida this past January, a Canadian presenter discussed how he was building a flying disc, and a long-term credible NASA official who was there confirmed the aerodynamic soundness of this garage/back-yard built device. Meanwhile, the U.S. stock market is blissfully unaware and the American public slumbers. For how long? The Goldman Sachs Cash Commodity Index is attempting to hold support with oversold conditions now, as is the CRB Index above 235. We'll see what happens once this end-of-quarter is done.
June 26, 1997R.E. McMaster, Jr., Editor
The Reaper
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