The Passing Parade

Dear Sendero,

Before we get to today’s posting, I have news to share.

As a few of you may remember, as part of dialing back my everyday responsibilities at Casey Research a couple of years ago, I stepped away from writing a weekly newsletter.

Furthermore, I swore off ever again being anchored to a fixed editorial deadline.

Subsequently, I started Sendero as an outlet for my writings, but without a fixed schedule.

Well, that was then, and this is now.

While additional details will follow in due course, the long and short of it is that later this month I will assume the role as the lead editor/writer for The Passing Parade, a free weekly e-letter.

Like Sendero, The Passing Parade will only touch on topics I find interesting and want to write about. Sometimes it will be economics and investment markets, other times it will be politics, and often it will deal with the never-ending follies of the human ape.

The masthead, pasted a bit further on, should give you a good idea as to the tone…

Between now and the official launch of The Passing Parade later this month, I will be posting the new letter under the Sendero banner. I would love your feedback.

Once The Passing Parade launches, I will add you to the free subscriber list for that. Of course, if you ever want off the list it’s as easy as clicking the link at the bottom of every email.

As for Sendero, it will continue but for more personal musings, though with the added workload, I expect my Sendero postings will be even more irregular than they already are.

If you have any questions or comments, you can use the comment form at the bottom of this page or drop me a note at my personal email For me you are all like an extended family and I am happy to hear from you any time.

I’m very excited about the new venture and look forward to sharing more news at the right time.

I do hope you’ll like The Passing Parade and that we will also stay in touch on a more personal level via Sendero.

With that rather long warm-up, let’s join the parade as it winds down the trail…

It’s a bit of a mish-mash and, for the first time ever for Sendero, features guest contributions. We’ll do that from time to time in The Passing Parade, though I plan on writing most of it.

In my last posting, entitled The End of You, I covered Google’s efforts to brainwash the populace and even sway elections by manipulating what search engine results you see.

Today we continue with a related theme in the form of a brief article by my dear friend and now associate Angela van Schalkwyk on the near certainty that Google will know the outcome of the U.S. presidential election months in advance. And maybe already does.

After which I’ll be back with a discussion of an interesting anomaly to do with oil prices and treasury yields.

But, first, turning up the volume on Black Sun by Death Cab for Cutie, it’s my pleasure to welcome Angela to the stage.

And the winner is ….

There is, potentially, unlimited financial advantage in knowing the confirmed result of an event before it occurs. It is for this reason that a (vain) attempt has been made to outlaw insider trading.

The outcome of the US presidential elections is no different. The certain knowledge of that outcome might yield significant results for the astute investor who understood the economic consequences long before they occurred. A clever punter might even find a way to leverage his bets to provide some spectacular odds – especially if a way could be found to predict the unlikely election of President (The Donald) Trump.

That might be the equivalent of knowing the outcome of the Kentucky Derby before the race was run. For those who rely on the favor of the political class to grease the skids for their industry or a specific company, knowing which candidate to fawn over in advance of the election could only be to the good.

Reliance upon opinion polls and the analyses of political experts has commonly been the method employed by election watchers attempting to predict political outcomes. Shakespeare’s Macbeth relied upon the prediction of “wither’d and wild” witches staring deeply into a burning, bubbling caldron to convey the portentous message of who “shalt be king hereafter”. Today’s equivalent of that caldron is already with us – in electronic form. Google, it seems, has the same mystical powers.

There is no need to struggle to predict the elections. Google knows how we are going to vote. This is the opinion of Dr Robert Epstein, senior research psychologist, at the American Institute for Behavioral Research and Technology.

For the past few years, Dr Epstein and his associate, Ronald E. Robertson have conducted research on the Search Engine Manipulation Effect (SEME). From their research, they concluded that Google Trends can tell you who will be the winner of each primary.

Epstein writes -- “Google Trends tells you about search activity, and if lots more people are searching for ‘Donald Trump’ than for ‘Ted Cruz’ just before a primary, then more people will probably vote for Trump.”

Another interesting observation from Dr Epstein -- “When you run the numbers, search activity seems to be a pretty good predictor of voting. On primary day in New Hampshire this year, search traffic on Google Trend ( was highest for Trump, followed by John Kasich, then Cruz—and so went the vote.”

But analyzing Trends, Twitter tweets and Facebook to forecast elections is for amateurs. According to Dr Epstein, “Google actually knows exactly how we are going to vote”.

For starters, Google can analyze the content of your email box and all your messages. Given that over one billion people use its Gmail service, that is not an insignificant data set.

But even without using Gmail, Google can track and monitor your likely voting preferences. Dr Epstein explains that Google has internet users covered on more than 60 platforms, 24 hours a day and can consolidate the information into structured personal profiles. That accounts for the bombardment of targeted ads that appear with irritating regulatory on everyone’s Android app, iPad or laptop screen.

“On a scale of 1 to 10, where 1 is incredibly easy and 10 is incredibly hard, how easy do you think it would be for Google to tabulate (a) who is planning to vote on election day and (b) whom they are planning to vote for? If you said ‘1’, raise your hand again, because that is how easy it would be.”

While the rest of us will have to wait until November 8 to know who the next U.S. president is, Google and any of the large search engine operators will have a big head start and begin making the moves needed to secure their piece of the political pie.

David again.

If you’ve got a friend in the executive suite at Google and could get the tip off, one might be tempted to turn a profit by betting on the outcome.

Unfortunately, in the Land of the Free betting on the outcome of the presidential race is largely illegal, but maybe you have a non-citizen friend who could set up an account at Ladbrokes or another online bookie and place a wager on your behalf.

Despite the last of the Republican challengers falling to The Donald, the odds of his winning the big prize are still very attractive at 9-4. A winning $4.00 bet will get you $9.00.

Even with Bernie’s success revealing for all to see just how weak Hillary is as a candidate, she remains the handicapper’s favorite at 4-11, meaning an $11 bet will return only a paltry $4.00.

However, I suspect the odds will change pretty quickly after September 26. That’s when the first of the four presidential debates begin.

Rather than the usual parade of scripted banalities, it wouldn’t surprise me if there wasn’t some sort of spontaneous combustion when the two candidates step onto the same stage. I plan on watching it here in the Argentine outback with a fine bottle of Bad Brothers MaTaCa blend at my elbow.

A tangential thought: if it is as easy as it must be for Google to know in advance who the next president will be, imagine what else they know about the future?

For example, whether the stock market is on the verge of a major move? No problem.

Or, where the next major military deployments are going to take place? A quick analysis of the email traffic of military personnel and their families would make that a snap.

Whether gold is going to go up or down? Child’s play.

Definitely food for thought.

We now turn to an interesting observation on a market anomaly from Jake Weber, a partner and senior researcher in our new venture. Jake came to work for me straight out of college then moved through the ranks at Casey Research to become the senior researcher for The Casey Report. Deciding it was time to fly the nest, he moved back to Chicago and took a job on a proprietary trading desk with Chopper Trading.

Jumping forward five years, when I learned Jake had decided to flee the Chicago winters and might be available, I reached out to him and was thrilled when he agreed to join the team. To say I’m a big fan would be a gross understatement.

With that briefest of introductions, here’s Jake…

The Conflicting Message from Oil and Treasury Markets

After hitting an eight-year low of $26.19 per barrel in February, crude oil prices sharply rebounded, jumping by over 50%. Such a rapid increase in oil prices would normally be considered very inflationary, which in turn should cause Treasury Bond yields to rise.

The correlation between oil and inflation is not perfect, but the cause and effect relationship is pretty obvious. When oil prices rise people pay more at the gasoline pumps and for heating their homes. But the inflationary pressures also build in other ways. For starters, rising fuel costs for farmers and for the truckers who transport the food feeds into higher prices at the checkout.

To state the obvious, oil is a major input for the entire economy. So it’s logical that higher oil prices will eventually translate into higher inflation. However, as this chart from Credit Suisse shows, that’s not the message the Treasury Bond market is sending.

As you can see the left axis and the gray bars show the percentage increase in oil over the past three-month periods where oil has appreciated strongly.

The right access and horizontal red lines show the concurrent move in 10 Year Treasury Yields during those periods. In the most recent occurrence, instead of popping up with the oil price, for the first time ever, Treasury yields fell.

Simply, the oil and Treasury Bond markets are sending conflicting messages about inflation. That investors are willing to accept lower yields signals a lack of concern about inflation despite spiking energy costs.

So who are we to believe?

In an attempt to come to an answer, let’s start by putting the recent oil rally in context.

The price of crude oil reached $105 per barrel in the summer of 2014 before nosediving by 75% to its February 2016 low of $26.19. Since bottoming out, crude oil has traded as high as $45.98, an impressive 76% reversal.

This sort of volatility has not been unusual over the last decade, but based on recent history $45 oil is still very cheap. The ten-year average price is $79.86 and the five-year average $82.23 per barrel.

Oil could jump another 50% from here and still be below the ten-year average price.

Meanwhile, at the most recent reading in March, the year-over-year change in the consumer price index was 0.87%, well below the Fed’s 2% inflation target. In fact, inflation hasn’t met the Fed’s target since June of 2014, and there haven’t been more than a few months of 2% inflation strung together since the Spring of 2012.

Considering that oil is still historically cheap and inflation subdued, the anomaly between oil and Treasury markets makes sense. And if I had to side with one of these two markets, I think the Treasury market is probably sending the more accurate message about inflation.

And, perhaps, signaling skepticism about the oil rally?

Closing Thoughts

Speaking of Folly…

I just came across a news item that I found hard to believe, so I had to double check it wasn’t one of those internet fabrications. But it’s real! Here’s two articles, one from the rather emphatic Breitbart ( and the other from the more staid BBC (

The news flash is the EU Commission, that unelected passel of meddlesome putzis, is actually proposing to fine member states 250,000 euros for each Middle-Eastern refugee they refuse to welcome with open arms.

Given the EU’s plan was to resettle 160,000 refugees with only a fraction of that number being officially taken in, the taxpayers of the member states could conceptually be handed a bill totaling billions. For example, according to the BBC, if Poland doesn’t bend over and open its borders it could be on the hook for 1.75 billion euros (US $2 billion).

With the close attention being paid by the British population ahead of the June 23 “Brexit” vote, you would think the comrades at the EU would be a bit more careful about revealing the iron fist cloaked by the velvet glove.

Regardless, forcing member states to choose between opening their borders to an invasion – which, as part of the grand plan to re-settle the Middle-East in the heart of Europe, now also includes visa-free travel to 80 million Turks – could be the spark that ultimately blows the EU experiment back to the bureaucratic hell from which it emerged.

Is Your Society Doomed? A Quiz.

The always interesting Zero Hedge blog recently reminded readers of how you can tell the state of a nation by referring to Ayn Rand’s Atlas Shrugged. We’d agree she nailed it on the head. Here’s Zero Hedge.

Cynics, skeptics, and fiction-peddlers are frowned upon by the Obama administration (and the mainstream media) when it comes to our glorious leader's economic miracle. So we thought a simple litmus test might be useful to judge just how 'doomed' the nation really is...

"When you see that in order to produce, you need    to obtain permission from men who produce nothing;
when you see that money is flowing to those who deal not in goods, but in favors;
when you see that men get rich more easily by graft than by work;
and your laws no longer protect you against them, but protect them against you; may know that your society is doomed."

Atlas Shrugged - Ayn Rand

We live in interesting times – as in blind date ‘interesting’. Can’t see what’s next.

And with that, I will sign off for the week, wishing you happy trails as I do.

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