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This Friday is going to be a session for active short-term traders, and it will likely be unpleasant for investors.

Something broke in markets on Thursday. There are a few things that worry me about the latest bout of risk aversion. This is in context that I’ve been an unrelenting stocks bull since the December Fed meeting…

But now I’m uneasy…

The Thursday selloff confused people.

Initially, many blamed the comments from Fed’s Kashkari about there potentially being no US rate cuts this year.

However, a quick look at a few charts shows that (a) yields fell rather than climbed, so his hawkish lines did not impact, and (b) equities started selling off before his headlines.

It’s never a good sign when people struggle to identify why stocks have a relatively large swoon.

If an asset is weak without an obvious catalyst, it suggests that it can really get destroyed if a genuine risk materializes.

For good order, the weakness in E-minis coincided with the oil price rise that in turn followed the Netanyahu headlines.

We have key US data this morning at a time of vulnerability for the market in terms of the Fed narrative.

We’ve run a long way on the idea of the Fed being dovish despite a strong US economy.

We’re getting closer to the point where we must acknowledge that either the Fed won’t be easing soon, OR the economy is in more trouble than we thought.

It means that we’re in the unusual-in-recent-times setup where a big surprise in either direction could hurt stocks today.

(For clarity and consistency, I would only see this as a multi-week consolidation/retrenchment and not some long-term bearish turning point).

…click on the above link to read the rest of the article…

Irony Alert: “Outlawing” Recession Has Made a Monster Recession Inevitable

February 15, 2024

Irony Alert: “Outlawing” Recession Has Made a Monster Recession Inevitable

Those who came of age after 1982 have never experienced a real recession, and so they’re unprepared for anything other than guarantees of rescue and permanent expansion.

The mainstream view is that recession is caused by economic-financial factors. The mainstream view is wrong, for recession is ultimately caused by Wetware1.0–human nature. Human nature–our innate attraction to windfalls and something-for-nothing, our ability to habituate to extremes and normalize counterproductive dynamics–manifest as economic-financial factors, but these are effects, not causes.

The mainstream view is that recessions are bad, so let’s make sure they never happen. In other words, let’s outlaw them by flooding the economy and financial system with Federal Reserve monetary stimulus and federal stimulus via increased deficit spending.

The history of the past 40 years “proves” these policies effectively eliminate recession: all recessions since 1981-82 have been shallow and brief, basically a spot of bother that lasts one quarter.

Our Wetware1.0 has responded to this “no recession guarantee” in ways that count as unintended consequences. Massive “emergency” stimulus that became permanent policy has created a bubble economy in which low interest rates and unlimited credit for those who are more equal than others has sparked demand for income-producing assets, which then sparked a speculative mania.

We’ve habituated to both the bubble economy and the speculative mania so that these are now considered normal. But behind the comfortable normalization, something counterproductive has taken hold: we’re now addicted to the bubble economy and its crazed twin, speculative mania. If the bubbles pop and speculators go broke, the economy and financial system will both implode.

Without ZIRP (zero-interest rate policy), capital actually has a cost, and the bubble economy cannot survive if capital has a cost. Once capital has a cost, then speculation becomes risky, and speculation cannot survive if risk actually has a cost.

…click on the above link to read the rest…

Poland’s central bank predicts double-digit inflation until 2024

November 22, 2022

Poland’s central bank predicts double-digit inflation until 2024

(Natural News) The National Bank of Poland (NBP) has predicted that the Central European nation will be saddled with high inflation for the next two years.

According to the NBP, yearly inflation will hit 14.5 percent in 2022 and drop to 13.1 percent in 2023. Single-digit rates will only begin by 2024, when the country’s inflation is projected to decrease to 5.9 percent. The central bank’s inflation target of 2.5 percent is only expected to be accomplished in 2025.

Figures from Statistics Poland (GUS) showed that inflation in the country hit 17.2 percent in September, and increased to 17.9 percent in October.

The NBP also forecast a 0.7 percent growth in Poland’s gross domestic product (GDP) for 2022. Meanwhile, the GUS predicts a 1.4 percent GDP growth in 2023 and a flat two percent GDP growth in 2024.

Amid all these projections, economic activity in Poland is about to weaken because of the heightened uncertainty, a tightening of financing settings and the economy’s adjustment to higher commodity costs, according to the European Commission’s latest economic forecast.

“The Polish economy continued its upward trajectory in the first half of 2022, although a marked drop in inventories and investment led to a contraction in real GDP in the second quarter. Data on the real economy suggest that growth was at full steam in the third quarter, with industrial output and retail sales expanding at a solid pace. As a result, despite a deterioration in confidence indicators, the second half of the year is expected to see a relatively good performance, leaving annual real GDP growth in 2022 at a projected 4.0 percent,” the European Commission (EC) report said.

Increase in inflation due to rise in food and energy prices

As stated by the NBP’s November report on inflation, the present increase can be largely attributed to the rise in food and energy prices brought by the war in Ukraine and the enormous increase in money printing by global central banks during the Wuhan coronavirus (COVID-19) pandemic…

…click on the above link to read the rest…

“Prepare For An Epic Finale” – Jeremy Grantham Warns Stock Market ‘Super Bubble’ Has Yet To Burst

August 31, 2022

“Prepare For An Epic Finale” – Jeremy Grantham Warns Stock Market ‘Super Bubble’ Has Yet To Burst

Having infamously spotted and profited from bubbles in Japan in the late 1980s, tech stocks at the turn of the century and in US housing before the 2008 financial crisis, GMO’s co-founder Jeremy Grantham laid out in his latest note to investors why the “super bubble” that he previously warned about hasn’t popped yet (despite this year’s somewhat chaotic market behavior).

“You had a typical bear market rally the other day and people were saying, ‘Oh, it’s a new bull market,” Grantham said in an interview with Bloomberg.

“That is nonsense.”

Specifically, the 83-year-old investors says that the surge in US equities from mid-June to mid-August fits the pattern of bear market rallies common after an initial sharp decline — and before the economy truly begins to deteriorate; and sees more trouble ahead because of a “dangerous mix” of overvalued stocks, bonds and housing, combined with a commodity shock and hawkishness from the Fed.

“My bet is that we’re going to have a fairly tough time of it economically and financially before this is washed through the system,’’ Grantham said.

“What I don’t know is: Does that get out of hand like it did in the ‘30s, is it pretty well contained as it was in 2000 or is it somewhere in the middle?”

In his note today, Grantham warns that we are entering the superbubble’s final act…

Executive Summary

Only a few market events in an investor’s career really matter, and among the most important of all are superbubbles. These superbubbles are events unlike any others: while there are only a few in history for investors to study, they have clear features in common.

…click on the above link to read the rest of the article…

Stock Market Crash Coming Before September As Massive Bubble Bursts

April 18, 2022

Stock Market Crash Coming Before September As Massive Bubble Bursts

Choose One, But Only One: Defend the Billionaire’s Bubble or the U.S. Dollar and Empire

January 20, 2022

Choose One, But Only One: Defend the Billionaire’s Bubble or the U.S. Dollar and Empire

The Empire is striking back, protecting what really counts, and the Billionaire Bubble sideshow is folding its tents.

One of the most enduring conceits of the modern era is that the Federal Reserve acts to goose growth and therefore employment while keeping inflation moderate (whatever that means–the definition is adjustable). This conceit is extremely handy as PR cover: the Fed really, really cares about little old us and expanding our ballooning wealth.

Nice, except it doesn’t. The Fed’s one real job is defending the U.S. dollar, which is the foundation of America’s global hegemony a.k.a. The Empire.

One thing and one thing alone enables global dominance: being able to create “money” out of thin air and use that “money” to buy real stuff in the real world. The nations that can create “money” out of thin air and trade it for magnesium, oil, semiconductors, etc. have an unbeatable advantage over nations that must actually mine gold or make something of equal value to trade for essentials.

The trick is to maintain global confidence in one’s currency. There is no one way to manage this, as confidence in a herd animal such as human beings is always contingent. Once the herd gets skittish, all bets are off.

The herd is exquisitely sensitive to movements on the edge of the herd, where threats arise. There are various tricks one can deploy to maintain confidence: pay a higher rate of interest on bonds denominated in one’s currency, so global capital flows into your currency; treat this capital well with a transparent set of tax laws and judiciary / regulatory oversight, maintain a deep pool of liquidity so capital can enter and exit without stampeding the herd, and having at least a semi-productive, diverse economy that generates goods, services and income streams to support the currency.

…click on the above link to read the rest of the article…

No Bubble Here, Folks!

January 13, 2022

No Bubble Here, Folks!

Anyone see a bubble anywhere? This is short and sweet because the picture says it all: We’ve just seen the fastest, highest rocket ride in stocks in the history of the world! Because that makes sense during a time of global plague and global economic lockdowns, creating extreme labor shortages, resulting in extreme product and materials shortages because 10% of the labor force has quit for good or been fired under the Biden Mandates. The present stock-market bubble makes the 1987 crash look like a pimple on the flank of the Himalayas! Anyone see where Mount Everest is in that picture? What could possibly go wrong??? But, hey, this is NOT a bubble created from Fed money laundering — uh, I mean printing, uh, I mean keystroking! If you believe that, you fully deserve everything that happens to you when the bubble bursts!

“Catastrophic” Property Sales Mean China’s Worst Case Scenario Is Now In Play

October 9, 2021

“Catastrophic” Property Sales Mean China’s Worst Case Scenario Is Now In Play

No matter how the Evergrande drama plays out – whether it culminates with an uncontrolled, chaotic default and/or distressed asset sale liquidation, a controlled restructuring where bondholders get some compensation, or with Beijing blinking and bailing out the core pillar of China’s housing market – remember that Evergrande is just a symptom of the trends that have whipsawed China’s property market in the past year, which has seen significant contraction as a result of Beijing policies seeking to tighten financial conditions as part of Xi’s new “common prosperity” drive which among other things, seeks to make housing much more affordable to everyone, not just the richest.

As such, any contagion from the ongoing turmoil sweeping China’s heavily indebted property sector will impact not the banks, which are all state-owned entities and whose exposure to insolvent developers can easily be patched up by the state, but the property sector itself, which as Goldman recently calculated is worth $62 trillion making it the world’s largest asset class, contributes a mind-boggling 29% of Chinese GDP (compared to 6.2% in the US) and represents 62% of household wealth.

It’s also why we said that for Beijing the focus is not so much about Evegrande, but about preserving confidence in the property sector.

But first, a quick update on Evergrande, which – to nobody’s surprise – we learned today is expected to default on its offshore bond payment obligations imminently according to investment bank Moelis, which is advising a group of the cash-strapped developer’s bondholders. Evergrande, which is facing one of the country’s largest defaults as it wrestles with more than $300 billion of debt, has already missed coupon payments on dollar bonds twice last month.

…click on the above link to read the rest of the article…

The Market Crash Nobody Thinks Is Possible Is Coming

September 30, 2021

The Market Crash Nobody Thinks Is Possible Is Coming

The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.

The ideal setup for a crash is a consensus that a crash is impossible–in other words, just like the present: sure, there are carefully measured murmurings about a “correction” but nobody with anything to lose in the way of public credibility is calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip that will immediately be bought.

What I’m calling for is a rip your face off, weeping bitter tears over the grave of the speculative wealth that you thought was forever crash. All those buying the dip because the Fed will never let the market go down will be crushed like scurrying cockroaches and all those trying to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Everything Bubble pops, well, everything pops. There is no shelter in a risk-off cascade.

The crash is coming as a result of multiple mutually reinforcing dynamics, the first being that no “serious person” believes a crash is possible, much less imminent. In no particular order, here are a raft of other causally consequential triggers of a cascading market crash:

1. As I noted in my call for the top, Is Anyone Willing to Call the Top of the Everything Bubble? (September 6, 2021), there is no history to support the widespread confidence that the extremes of over-valuation, leverage, euphoria and speculation last forever, or even much longer than the lifespan of a cockroach. We’re well past that benchmark into unprecedented insanity. So what happens next: squish.

Just for the record, the Dow topped out on August 13, the S&P 500 topped out on September 2 and the Nasdaq topped out the day after my call, September 7. (Close enough for gummit work…)

2. The credibility of the Federal Reserve is in the dumpster, which just caught fire. As I explained in The Fed Is Fatally Corrupt– And So Is the Rest of America’s Status Quo (September 10, 2021), the Fed is corrupt on multiple levels–thoroughly, completely corrupt, and so are all its minions, proxies, apparatchiks, toadies, apologists and lackeys.

…click on the above link to read the rest of the article…

Peter Schiff: Central Banks Have Created the Mother of All Bubbles

August 6, 2021

Peter Schiff: Central Banks Have Created the Mother of All Bubbles

The Federal Reserve and other central banks around the world have pumped trillions of dollars into the global economy and depressed interest rates to artificially low levels to blow up the mother of all bubbles. In his podcast, Peter Schiff explained how the recent acquisition of Afterpay by Square reveals the extent of this global bubble economy that will inevitably have to pop.

Square paid $29 billion in an all-stock deal to purchase payment processor Afterpay. It was the biggest corporate takeover in Australian history.

Shares of Square rose 10% on the deal. As Peter noted, this isn’t typical. Normally, when a company buys another company at a premium and issues a bunch of stock, the acquiring company’s stock price drops.

But not in today’s crazy bubble world. In this bizarro world, the acquiring company goes up.”

Peter said Square overpaid for a company that he doesn’t think has much value whatsoever.

Afterpay is touted as an alternative to a credit card. When you buy something using Afterpay at a participating retailer, you only have to pay 25% at the point of sale. You then make three more payments to Afterpay over a six-week time period. In effect, the consumer gets a six-week interest-free loan.

Afterpay has been viewed as a big competitor for traditional credit card companies, but Peter pointed out this really isn’t the case.

Everybody, or most of the people, who are using Afterpay, are using their credit cards to pay Afterpay. All Afterpay is is another middleman that is getting in the way between the transaction.”

Afterpay generates revenue by charging merchants between 4 and 6% for every sale. Visa and Mastercard typically charge about 2%.

…click on the above link to read the rest of the article…

“This Is The Biggest Bubble I’ve Seen In My Career” – Dems’ Infrastructure Spending Could Lead To Devastating Crash, Druck Warns

July 23, 2021

“This Is The Biggest Bubble I’ve Seen In My Career” – Dems’ Infrastructure Spending Could Lead To Devastating Crash, Druck Warns

This isn’t the first time billionaire investor Stanley Druckenmiller has warned that US markets are caught up in a “raging mania” fostered by the trillions of dollars in government spending. Druck, an acolyte of George Soros known for his macro investing prowess (even as he complains that contemporary Fed-backstopped markets “make no sense”) is a frequent guest on CNBC. But on Friday morning, he made a brief appearance on MSNBC’s Morning Show with Stephanie Ruhle, who seemed ill-equipped to respond to Druck’s arguments about why the Dems’ multi-trillion two-part infrastructure plan will end up hurting America’s poorest citizens.

Druckenmiller

As Druck explains, the “V-shaped” economic recovery has been “the sharpest recovery in history,” noting that it took 10 years for the American economy to achieve the same gains following the start of the Great Depression.

The problem is that the nearly $6 trillion allocated by Congress to combat the economic impact of COVID has been spent after the economy already finished recovering. The accelerating pace of inflation, and inability of certain businesses to hire lower-wage workers, are but byproducts of this.

Source: Committee for a Responsible Federal Budget

Moving on, Druck pointed out that the biggest economic crises of the last 100 years have largely been caused by asset bubbles and inflation. “Inflation is a tax the poor can’t afford or avoid,” Druck added.

Any further stimulus spending is intended to fix a problem that, in Druck’s words, “doesn’t exist anymore.” He added: “If I was Darth Vader and I wanted to destroy the US economy, I would do aggressive spending in the middle of an already hot economy.”

…click on the above link to read the rest of the article…

Signs, Signs, Everywhere Signs

April 26, 2021

SIGNS, SIGNS, EVERYWHERE SIGNS

“Fools, as it has long been said, are indeed separated, soon or eventually, from their money. So, alas, are those who, responding to a general mood of optimism, are captured by a sense of their own financial acumen. Thus it has been for centuries; thus in the long future it will also be.” ― John Kenneth Galbraith, A Short History of Financial Euphoria

132 Trouble Ahead Sign Photos - Free & Royalty-Free Stock Photos from Dreamstime

The signs of an epic bubble of historic proportions are everywhere. The stock market is a bubble, with valuations exceeding 2001. Margin debt is at all-time highs. The bond market is a bubble, with the Fed artificially suppressing rates and pumping trillions of QE into Wall Street. Housing is experiencing another bubble, with prices now far exceeding the 2005 peak. Bitcoin and the rest of the crypto-currencies are a bubble, being driven by the excess liquidity sloshing around the system. A joke crypto currency like Dogecoin soars into the stratosphere because money has no meaning anymore.

This dogecoin chart offers the clearest explanation for the buzz surrounding the 'joke' crypto - MarketWatch

Corporate, government and personal debt are at all-time highs and heading higher. Clueless millennial dolts are using their stimmy checks to day trade on Robinhood. Now the shysters have come up with a ridiculous concept called Non-fungible tokens (NFT), which has created a further frenzy of greed and fleecing. We are busy selling worthless electronic concepts to each other at higher and higher prices. The world has truly gone mad.

Are NFTs Dumb, a Scam, or Secretly Useful? – Reason.com

The herd will surely be separated from their money when this everything bubble bursts. The concept of risk has been bastardized and ignored, for now. Greed will surely turn to fear and no one sees it coming. The “experts” will continue to declare “buy now or miss out on the riches”. I’m sure these bubbles will burst, but I have no idea when…

…click on the above link to read the rest of the article…

Disoreder Will Come–As Confucious Warned

April 5, 2021

DISORDER WILL COME – AS CONFUCIUS WARNED

When bubbles burst, we will discover how very few superior men there actually are – as defined by Confucius:

“The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved.” – Confucius

Superior man can exist at many different levels in society, not necessarily linked to money or investments. There will be many people without money who are prepared at an intellectual or psychological level. These people are probably the happiest since sadly many wealthy people worry about their money all the time rather than enjoy it.

In this piece I am talking primarily about preparedness in relation to one’s wealth.

PS Important Postscript at the end of the article.

FOCUS ON WEALTH PRESERVATION

The investors we meet in our business are people who are risk averse and therefore very much focus on wealth preservation. These investors buy physical gold because they are concerned about the excessive risks in markets. They want to protect and insure their wealth against unprecedented financial and currency risk. Like ourselves, these investors consider physical precious metals, stored outside a fragile banking system, as the ultimate form of wealth preservation.

But investment gold represents less than 0.5% of world financial assets. This means that a minuscule percentage of investors insure their wealth in gold. This is clearly surprising bearing in mind that over 5,000 years gold is the only money that has survived.

…click on the above link to read the rest of the article…

Egon von Greyerz, gold switzerland, inflation, risk, gold, precious metals, wealth, financial bubble, bubble, currency, banking system

Ponzis Go Boom!!!

March 29, 2021

Ponzis Go Boom!!!

For the past few years, I have been critical of the Ponzi Sector. To me, these are businesses that sell a dollar for 80 cents and hope to make it up in volume. Just because Amazon (AMZN – USA) ran at a loss early on, doesn’t mean that all businesses will inflect at scale. In fact, many of the Ponzi Sector companies seem to have declining economics at scale—largely the result of intense competition with other Ponzi companies who also have negligible costs of capital.

I recently wrote about how interest rates are on the rise. If capital will have a cost to it, I suspect that the funding shuts off to the Ponzi Sector—buying unprofitable revenue growth becomes less attractive if you have other options. Besides, when you can no longer use presumed negative interest rates in your DCF, these businesses have no value. I believe the top is now finally in for the Ponzi Sector and a multi-year sector rotation is starting. However, interest rates are only a small piece of the puzzle.

Conventional wisdom says that the internet bubble blew up due to increasing interest rates. This may partly be true, but bubbles are irrational—rates shouldn’t matter—it is the psychology that matters. I believe two primary forces were at play that finally broke the internet bubble; equity supply and taxes. Look at a deal calendar from the second half of 1999. The number of speculative IPOs went exponential. Most IPOs unlock and allow restricted shareholders to sell roughly 180 days from the IPO. Is it any surprise that things got wobbly in March of 2020 and then collapsed in the months after that? Line up the un-lock window with the IPOs. It was a crescendo of supply—even excluding stock option exercises and secondary offerings…

…click on the above link to read the rest of the article…

adventures in capitalism, ponzi, interest rates, bubble, financial markets, psychology, speculation,

Yield Curve Control: Bubbles And Stagnation

March 25, 2021

Yield Curve Control: Bubbles And Stagnation

Central banks do not manage risk, they disguise it. You know you live in a bubble when a small bounce in sovereign bond yields generates an immediate panic reaction from central banks trying to prevent those yields from rising further. It is particularly more evident when the alleged soar in yields comes after years of artificially depressing them with negative rates and asset purchases.

It is scary to read that the European Central Bank will implement more asset purchases to control a small love in yields that still left sovereign issuers bonds with negative nominal and real interest rates. It is even scarier to see that market participants hail the decision of disguising risk with even more liquidity. No one seemed to complain about the fact that sovereign issuers with alarming solvency problems were issuing bonds with negative yields. No one seemed to be concerned about the fact that the European Central Bank bought more than 100% of net issuances from Eurozone states. What shows what a bubble we live in is that market participants find logical to see a central bank taking aggressive action to prevent bond yields from rising… to 0.3% in Spain or 0.6% in Italy.

This is the evidence of a massive bubble.

If the European Central Bank was not there to repurchase all Eurozone sovereign issuances, what yield would investors demand for Spain, Italy or Portugal? Three, four, five times the current level on the 10-year? Probably. That is why developed central banks are trapped in their own policy. They cannot hint at normalizing even when the economy is recovering strongly, and inflation is rising.

Market participants may be happy thinking these actions will drive equities and risky assets higher, but they also make economic cycles weaker, shorter, and more abrupt.

…click on the above link to read the rest of the article…

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