You Can Either Surf, or You Can Fight
| Kilgore: | Smell that? You smell that? |
| Lance: | What? |
| Kilgore: | Napalm, son. Nothing else in the world smells like that. |
– “Apocalypse Now” (1979)
Hello, hello, hello, how low? [x3]
– Nirvana, “Smells Like Teen Spirit” (1991)
Outside the bus the smell of sulfur hit Bond with sickening force. It was a horrible smell, from somewhere down in the stomach of the world.
– Ian Fleming, “Diamonds Are Forever” (1956)
There’s more than a whiff of 2008 in the air. The sources of systemic financial sector risk are different this time (they always are), but China and the global industrial/commodity complex are even larger tectonic plates than the US housing market, and their shifts are no less destructive. There’s also more than a whiff of 1938 in the air (hat tip to Ray Dalio), as we have a Fed that is apparently hell-bent on raising rates even as a Category 5 deflationary hurricane heads our way, even as the yield curve continues to flatten.
What really stinks of 2008 to me is the dismissive, condescending manner of our market Missionaries (to use the game theory lingo), who insist that the US energy and manufacturing sectors are somehow a separate animal from the US economy, who proclaim that China and its monetary policy are “well contained” and pose little risk to US markets. Unfortunately, the role and influence of Missionaries is even greater today in this policy-driven market, and profoundly misleading media Narratives reverberate everywhere.
For example, we all know that it’s the overwhelming oil “glut” that’s driving oil prices down and wreaking havoc in capital markets, right? It’s all about OPEC versus US frackers, right?
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