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November 4th, 2019… Back in the Real World…

November 4th, 2019… Back in the Real World… 

Trawling through the market headlines this morning, I’m struck by the number of comments about how much better the investment environment looks. There is less likelihood of a global recession, corporate earnings aren’t as bad as expected, and jobs are growing. I am unconvinced. I see worrying connections across the wires.  From my perspective – which admittedly has been from a train in the middle of nowhere – its feels we’ve reached the end of the something.  Time has been called on this particular era of irrational market exhuberance. 

My spidey senses are tingling due to manner in which events across markets, individual stocks, politics, geopolitics and gut-instinct are connected. I’m not predicting sudden or massive financial collapse – just a wake up and smell the coffee correction in Bonds (which feels underway), and selective deflation in over-optimistic sectors of the stock markets. As always, any reversal will set off wailing and despair, yet most of the critical lessons will be missed.  Fear not – we will get another chance to relearn them in a few years time! (Blain’s Market Mantra No 2: The Market has no memory.)

It’s just as well we aren’t heading for the deep prolonged global recession so many naysayers have been predicting thru 2019. Slowdown yes. Trade is going to remain a problem. But growth drivers were changing anyway. Tech will change the world’s trade roads. China’s furious growth spurt of the last 20 years is over. India might be growing, but it lacks the state momentum to drive global growth the way China did. And climate change will prove deeply significant in the future as consumers are persuaded to believe food miles and imports matter. 

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

Pondering the Collapse of the Entire Shadow Banking System

Pondering the Collapse of the Entire Shadow Banking System

Image courtesy of my friend Chris Temple.

What’s behind the ever-increasing need for emergency repos? A couple of correspondents have an eye on shadow banking.

Shadow Banking

  • The shadow banking system consists of lenders, brokers, and other credit intermediaries who fall outside the realm of traditional regulated banking.
  • It is generally unregulated and not subject to the same kinds of risk, liquidity, and capital restrictions as traditional banks are.
  • The shadow banking system played a major role in the expansion of housing credit in the run up to the 2008 financial crisis, but has grown in size and largely escaped government oversight since then.

The above from Investopedia.

Hey It’s Not QE, Not Even Monetary

Yesterday, I commented Fed to Increase Emergency Repos to $120 Billion, But Hey, It’s Not Monetary.

Let’s recap before reviewing excellent comments from a couple of valued sources.

The Fed keeps increasing the size and duration of “overnight” funding. It’s now up $120 billion a day, every day, extended for weeks. That is on top of new additions.

Three Fed Statements

  1. Emergency repos were needed for “end-of-quarter funding“.
  2. Balance sheet expansion is “not QE“. Rather, it’s “organic growth“.
  3. This is “not monetary policy“.

Three Mish Comments

  1. Hmm. A quick check of my calendar says the quarter ended on September 30 and today is October 23.
  2. Hmm. Historically “organic” growth was about $2 to $3 billion.
  3. Hmm. Somehow it takes an emergency (but let’s no longer call it that), $120 billion “at least” in repetitive “overnight” repos to control interest rates, but that does not constitute “monetary policy”

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

Eurozone

QUESTION: Hi Marty,

I’m based here in South of England, within the commuter belt into London. The ECM forecasts an economic downturn 18.01.2020, and Europe looks to be at the epicentre. My own research tells me the job cuts in the auto sector in Germany are quite severe.

How does all this play out after January? We have already witnessed companies collapsing, Thomas Cook, and many teetering on the very of edge of collapse. How bad is this going to be, and how does this compare to 2008?

Of course, the next 3 months of 2019 are going to be very volatile, what I’m trying to understand is how does all this look like to the average city worker within finance, law or professional services.

Within my own peer group most are clueless on what is going on and perhaps they should be thinking of income protection rather than going out and buying £60k Range Rovers. The apathy never ceases to amaze me.

I welcome your insight. Thanks for your great work which keeps us mere mortals informed.

Cheers IB

ANSWER: The answer is very bad. The structure of the Eurozone is an absolute disaster. It is promoted as a single country, but it lacks everything that stands behind a currency. Just look at the tariffs starting between the USA and the EU. It is IMPOSSIBLE to negotiate a trade deal with Europe because each country can veto any deal, proving this is not a single country, and thus there is no substance behind the single currency. This is why I say Brexit is the only way for Britain to survive. It cannot negotiate any trade deals with the USA, China, Canada, or whoever because any other state can veto it. They surrendered their sovereignty and it is undermining the European economy.

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

The Myth of Imminent Collapse

The Myth of Imminent Collapse

The ills that have haunted our species since time immemorial — starvation, illness, protection from the elements — are less prevalent than ever before. At the same time we’ve probably never been as disillusioned about the fruits of progress

Panicking about an imminent apocalyptic disaster, people march on the streets of the most prosperous cities in all of human civilization. They chant about impending extinction of humankind or the planet itself, about an unsustainable way of life, about an invisible gas produced as a by-product of our increasingly affluent lifestyles. Sixteen-year-olds are addressing the World Economic Forum and the UN imploring us to reconsider the irresponsibly disastrous path we’ve entered upon. Elected officials are proposing one fanciful idea after another on topics none of them seem to understand

More than one commentator has pointed to a crisis of spirituality and how radical environmentalism has filled the void left behind by religion. Moral outrages over plastic and the Amazon are blown entirely out of proportion. Virtue signaling and “taking a stance” are more important than effecting change. 

In that light, looking at actual societal collapses is relevant. When podcasts like Paul Cooper’s Fall of Civilization are trending on most platforms and the popular historian Dan Carlin’s forthcoming book The End Is Always Near is making huge waves, it is clearly time to dust off the work of esteemed geographer Jared Diamond — particularly his book Collapse: How Societies Choose to Fail or Survive, the follow-up to his Pulitzer Prize–winning Guns, Germs, and Steel (which just came out in a 20th-anniversary edition). This year he released Upheaval: Turning Points for Nations in Crisis, which is a natural continuation of the broad-brushed portrait of the fundamental challenges for human societies that he has been painting for 20 years.

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

Falling From Grace

Falling From Grace

Years ago, Doug Casey mentioned in a correspondence to me, “Empires fall from grace with alarming speed.”

Every now and then, you receive a comment that, although it may have been stated casually, has a lasting effect, as it offers uncommon insight. For me, this was one of those and it’s one that I’ve kept handy at my desk since that time, as a reminder.

I’m from a British family, one that left the UK just as the British Empire was about to begin its decline. They expatriated to the “New World” to seek promise for the future.

As I’ve spent most of my life centred in a British colony – the Cayman Islands – I’ve had the opportunity to observe many British contract professionals who left the UK seeking advancement, which they almost invariably find in Cayman. Curiously, though, most returned to the UK after a contract or two, in the belief that the UK would bounce back from its decline, and they wanted to be on board when Britain “came back.”

This, of course, never happened. The US replaced the UK as the world’s foremost empire, and although the UK has had its ups and downs over the ensuing decades, it hasn’t returned to its former glory.

And it never will.

If we observe the empires of the world that have existed over the millennia, we see a consistent history of collapse without renewal. Whether we’re looking at the Roman Empire, the Ottoman Empire, the Spanish Empire, or any other that’s existed at one time, history is remarkably consistent: The decline and fall of any empire never reverses itself; nor does the empire return, once it’s fallen.

But of what importance is this to us today?

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

There Is No Normal

There Is No Normal


The wheel of time rolls forward, never retracing its path, but because it is a wheel, and we are riding in it, a persistent illusion persuades us that the landscape is recognizably the same, and that our doings within the regular turning of the seasons seem comfortably normal. There is no normal.

There is for us, at this moment in history, an especially harsh turning (so Strauss and Howe would say) as our journey takes the exit ramp out of the high energy era into the next reality of a long emergency. The human hive-mind senses that something is different, but at the same moment we’re unable to imagine changing all our exquisitely tuned arrangements — especially the thinking class in charge of all that, self-enchanted with pixeled fantasies. The dissonance over this is driving America crazy.

The wheel hit a deep pothole in 2008 turning onto the off-ramp and has been wobbling badly ever since. 2008 was a warning that going through the motions isn’t enough to sustain a sense of purpose, either nationally or for individuals trying to keep their lives together ever more desperately. The cultural memory of the confident years, when we seemed to know what we were doing, and where we were going, dogs us and mocks us.

The young adults feel all that most acutely. The pain prompts them to want to deconstruct that memory. “No, it didn’t happen that way,” they are saying. All those stories about the founding of this society — of those Great Men with their powdered hair-doos writing the national charter, and the remarkable experience of the past 200-odd years — are wrong! There was nothing wonderful about it. The whole thing was a swindle!

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

Economic Collapse Imminent: Zimbabwe At ‘Tipping Point’ With ‘Wheels Coming Off’

Economic Collapse Imminent: Zimbabwe At ‘Tipping Point’ With ‘Wheels Coming Off’ 

Zimbabwe’s economic situation will continue to sour in 2H19 due to unfavorable weather conditions, foreign currency shortages and widespread power cuts, its finance minister said, as he responded to a deteriorating economic outlook by blacking out inflation statistics through the second half, and finally acknowledged what the International Monetary Fund told him in April: economic turmoil ahead.

Prices of essential goods and services have, in some cases, quadrupled this summer, due to the government renaming the RTGS currency as the Zimbabwe dollar, which has been on a rapid decline amid shortages, including electrical power, petrol products, American dollars, and food, reported Bloomberg.

Many Zimbabweans who supported the toppling of decades-long ruler Robert Mugabe two years ago are discovering that their economic situation is the most serious in a decade.

Emmerson Mnangagwa replaced Mugabe in 2017, he promised millions of Zimbabweans of an economic revival and that we are “open for business.” The sugar high of optimism only lasted for a short time; the effects of money supply expansion through the sale of Treasury bills under Mugabe’s rule has outweighed any positive advancements in the last several years. Mnangagwa outlawed the American dollar in favor of local currency that can’t be traded internationally, effectively making it extremely difficult for international firms to do business in the African country.

“Zimbabwe is at a tipping point and if it falls over the edge it’s going to be quite a long way in coming back,” said Derek Matyszak, a Zimbabwe-based research consultant for South Africa’s Institute for Security Studies. “The wheels are falling off. There is no way out of a Ponzi scheme other than a massive infusion of cash to pay off your creditors.”
*chart

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

BOOM! Fossil Fuel Combustion and the Mother of All Economic Busts

BOOM! Fossil Fuel Combustion and the Mother of All Economic Busts

Photograph Source: Eric Kounce TexasRaiser – Public Domain

William Catton focussed on what follows a boom in the human population. He spelled out the scenario in his 1980 book, Overshoot: The Ecological Basis of Revolutionary Change. As one reviewer put it, “Catton believed that industrial civilization had sown the seeds of its own demise and that humanity’s seeming dominance of the biosphere is only a prelude to decline.”

Catton hasn’t been alone. Many others have warned or at least implied an inevitable human population bust. But that inevitability is no longer likely to hit solely from overshoot alone, and not in some far-distant future. Instead, with the added pressure from our booming combustion of fossil fuels, a human population bust could plausibly be kicked into gear sometime “by” — a.k.a. before — 2050, or within the next 30 years.

This could be the mother of all economic busts.

The human population boom has been the bedrock of economic boom in sector after sector. It’s been the bedrock foundation of a profit boom for the fossil fuel combustion industries that now put it at risk. In the US alone, the booming human population has been the wellspring for surging numbers of visitors to the likes of Yellowstone National Park, city managers bent on promoting growth, the basis of soaring demand for logging to supply housing for a growing human herd.

Booms thus enjoy considerable public approval and political popularity. Over and over again, the long-ongoing human population boom has afforded the political elites and local boosters an opportunity to boast of a booming economy, sometimes raising local and even national concerns that they tout growth at any cost.

Bust, on the other hand, is a dirty four-letter word.

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

How to Destroy a Civilization

How to Destroy a Civilization

There are lots of ways to kill off a civilization. Wars, politics, economic collapse. But what are the actual mechanics? It might be a useful thing to know whether or not we are killing ourselves off.

Ancient Rome is a good place to start. They had an advanced civilization. They had running water, sewers, flush toilets, concrete, roads, bridges, dams, an international highway system, mechanical reapers, water-powered mills, public baths, soap, banking, commerce, free trade, a legal code, a court system, science, literature, and a republican system of government. And a strong army to enforce stability and peace (Pax Romana). It wasn’t perfect, but they were on their way to modernity.

One of my favorite quotes is from Marcus Tullius Cicero, statesman, orator and writer (106-43 BCE):

Times are bad. Children no longer obey their parents, and everyone is writing a book.

If that isn’t a mark of a civilized society I don’t know what is.

But Rome collapsed. I often wonder what would have happened if it hadn’t. Could we have avoided a thousand years of the Dark Ages. Could we have been flying airplanes and driving cars in the year 1000?

What the hell happened to Rome?

Dictators. After 500 years, the famous Roman Republic ended with the dictator Julius Caesar taking power. Four hundred years later his progeny and usurpers ran the Empire into the ground and Rome fell to invading barbarians.

The standard explanation for Rome’s decline and fall is that they devolved into dictatorships (true, but not the cause of their fall). Or they became decadent and corrupt (true, but not the cause of their fall). They fell to barbarian invasions (true, but not the cause of their fall).

Rome fell because the dictators ruined the Roman economy and the institutions that had made it prosperous. Rome was falling apart before the barbarian invasions.

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

The Stuff of Our Lives: The Seneca Collapse of Relocating

The Stuff of Our Lives: The Seneca Collapse of Relocating

The experience of relocating is curiously similar to an archaeological excavation of the ruins of a disappeared empire. Above, you can see two jars filled with old coins recovered from the nook and crannies of my house after emptying it of everything. Mostly these are old Italian “lira” coins, others are foreign coins and, in the smaller jar, you can see an Italian “gettone” used for making calls at public phones up to a few decades ago. This stuff has no monetary value, it is just a marker of passing time. 

You know that the “Seneca Effect” has to do with overshoot and collapse. From the time when the Roman philosopher Lucius Annaeus Seneca noted that “growth is slow, but ruin is rapid,” I keep finding new examples of application of the idea. One that I recently experienced had to do with relocating: moving away from the home where my family had been living since 1965. From then on, this 340 square meters (ca. 3600 ft2) house had been gradually filling up with all sorts of stuff. Emptying it in a couple of months of work was quite an experience. “Sobering” is the correct word, I’d say.

I don’t know if you are all good followers of Feng Shui, striving for good vibes and not too much stuff in your home. I didn’t consider myself as an adept of that philosophy, but I didn’t see myself as a serial accumulator of useless stuff, either. Well, I had to reconsider my position. I was a serial accumulator. Really, the amount of stuff that came out of my place was so large to be bewildering. And so much of it we had to throw away — bewildering, too. We are still a little bewildered, but the most intense part of the saga seems to be over, so maybe I can report about my experience in this post.

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

‘Deaths Of Despair’ In The U.S. Hit Record High – So How Bad Will Things Get When Society Starts To Completely Collapse?

‘Deaths Of Despair’ In The U.S. Hit Record High – So How Bad Will Things Get When Society Starts To Completely Collapse?

According to a shocking new report from the Commonwealth Fund, the suicide rate in the United States is the highest that it has ever been before.  Sadly, the same thing can be said about the death rates from drug overdoses and alcohol.  All three death rates are at an all-time record high, and yet our society is still fairly stable at the moment.  So if we are seeing this many “deaths of despair” right now, what in the world are things going to look like when our society really begins to start crumbling?  Today, Americans have literally thousands of different ways to entertain themselves, and yet we have never been unhappier.  One out of every six Americans is taking psychiatric drugs, we are currently dealing with “the worst drug crisis in American history”, and people are killing themselves in record numbers.  Nobody likes to be told that they are a failure, but it certainly appears that our nation has been on an extremely self-destructive path for a very long time.

Even though “deaths of despair” have reached record levels, the researchers at the Commonwealth Fund found that there are major regional differences.  The following comes from NBC News

Rates of deaths from suicides, drug overdoses and alcohol have reached an all-time high in the United States, but some states have been hit far harder than others, according to a report released Wednesday by the Commonwealth Fund.

As far as drug overdose deaths are concerned, researchers discovered that the states with the highest death rates were all in northern Appalachia

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

American Chernobyl

American Chernobyl

In the Spring of 1986 the Soviet Union was in a slow motion collapse. No one in the US intelligence agencies predicted it, the military was taken completely by surprise and no apologies were ever made for the thirty year, multi-trillion dollar oversight. It’s political and social institutions were Potemkin villages kept alive by little more than inertia yet on the outside everything appeared normal, and if not healthy, at least it seemed monolithic in it’s outward appearance.

The structural rot that had taken hold after the death of Stalin had become the central pillar of Eastern European civilization and the foundation upon which it was built- the blood of tens of millions of murdered citizens- softened the ground further, leading to it’s eventual implosion five short years later. On the 26th of April a failed experiment at a nuclear power plant in the Ukraine initiated a slow and steady series of system failures, leading to a full blown meltdown that forced the evacuation of tens of thousands of inhabitants from the exclusion zone.

Most Americans recall the event as a catastrophic ecological disaster that threatened- at that time- to spread radioactive particles across wide swaths of Europe, poisoning the groundwater that fed the Dnieper River, leading directly to the Black Sea. No one was certain in the aftermath of the extent of the damage, nor of the ability of the Soviet system to respond truthfully to international inquiries. It was assumed throughout the Free and Democratic nations of the West that the USSR was incapable of sharing anything that would reflect poorly on their ability to govern.

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

They’ve Stolen Our Future!

They’ve Stolen Our Future!

Collapse is in the cards

It’s time to have a serious conversation.  I know we’ve been having it, but maybe there’s another glove hidden beneath the one we’ve already taken off.

Put bluntly, there doesn’t seem to be any hope of avoiding a collapse of civilization.  The forces of the Business-As-Usual crowd are just too strong, the narrative machine too honed, the interests too entrenched to allow any sort of meaningful course correction at this time.

But is that the case?

Writing about the outcomes of the recent Australian elections which saw a pro-business, conservative government elected, Australian based reader-member ezlxq1949 said:

“They’ve stolen our future!”

That was the wail of the 11-y.o. daughter of a Greens candidate who cried herself to sleep the night after the astonishing election results came in. It couldn’t be worse; the public have sold themselves into almost complete captivity to the neoliberal élites called the Liberal Party. (Liberal = Conservative. Go figure.) It was supposed to have been a climate change election but became a jobs ‘n growth election.

Mind you, it wouldn’t have been much better if the opposition Labor Party had won; they’ve moved so far to the right that like the US we really have only one party with two heads. For instance, Labor would not commit to stopping the monster Adani coal mine.

So it’s goodbye to:

  • the ABC (the excellent government broadcaster which has the gall and temerity to criticise the government of the day; the government badly wants to get even)
  • renewable energy (fossil fools rule ok)
  • the Great Barrier Reef (sliced and diced to let coal ships cross it)
  • our river systems (suck them dry, privatise the water, send the profits to the Cayman Islands — as is already happening)
  • the Great Artesian Basin (world’s largest and deepest, to be contaminated by coal mines and fracking)
  • public services (cut back yet again to create a damaging government budget surplus)
  • public health (to be Americanised)
  • public education (to be privatised; maybe high schools this time)
  • the Great Australian Bight (a pristine area which may have oil under it; damn the pollution, full greed ahead)
  • southern ocean fish stocks (they’ll let the supertrawlers in now).

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

Pain Is Inevitable; But Suffering Is Optional

Pain Is Inevitable; But Suffering Is Optional

How to avoid becoming collateral damage in the coming crash.

Sometimes you really do find enlightenment at the top of the mountain.

I spent this week hiking in Montana’s Bitterroot mountain range, as a participant in the pilot run of a new personal-growth-through-adventure-travel startup.

In our group was a famous professional cyclist, who had been a superstar on the Tour de France for many years.

He has a fascinating life story, both on and off the bike. His tales of the super-human efforts required to prevail at the most elite level of this punishing sport are mind-blowing.

The relentless and gruelling training covering thousands and thousands of kilometers. The near-starvation state cyclists exist in to maximize their power-to-weight ratio. Endless travel. Horrific crash injuries. Sponsor pressures. The money and politics driving the sport. Overbearing regulators. Cut-throat teammates. And of course, the pervasive doping.

When we asked him how he managed to persevere at the top of such a demanding sport for so long, despite the huge toll it took on his health and his marriage, he thought for a moment then said: “I suppose I’m just really good at suffering”.

It’s clear that, in addition to some truly amazing experiences, his cycling days have left him with a legacy of damage that he’s still working through.

As he shared this with us, one participant wisely advised him to remember: Pain is inevitable. Suffering is optional.

Yes, he’ll still need to deal with the aftereffects of his racing years. But it’s up to him how much power he wants to give them over his happiness and life path from here.

From Mountains To Markets

I’m struck by how relevant the above advice is to investors right now.

It’s becoming increasingly clear that the end of the ten-year bull market has arrived.

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

Blain’s Morning Porridge – May 22 2019 – Tesla and Yoorp worries

Blain’s Morning Porridge – May 22 2019 – Tesla and Yoorp worries


“When the bough breaks…”

Have you ever watched a house of cards collapse? Sometimes a corner or a side comes down, and it can be sort of fixed… Sometimes the whole thing just gets blown away.  My Spidey Senses are all a-tingle this morning, triggered by 2 factors:

  1. Telsa: The spike in negative commentary on Tesla suggests THE moment is coming: a downgrade by a previous bull to $10 target price, doubts on the trajectory of sales, the realisation the Solar Tiles project is complete tosh (and a bail out of Musk’s cousins), the crash in its debt and recent convertible price,      and loads more, has led to the rather obvious conclusion Tesla will struggle to fund ongoing capital burn. Peak-Musk was some time ago. Many now think the orchestra is about to strike up Gotterdammerung. A loss of confidence in Tesla and Musk triggers all kinds of consequences.. (Links to stories will be posted here.)
  2. Europe: If you think UK politicians have embarrassed themselves trying to agree on how to exit Europe, wait till next week and ponder how such a disparate, populist hodge-podge of populist well-intentioned Euro-philes and Euro-phobes are going to agree on how to reform and continue European integration. I see two big market threats: i) The bond market, ii) and especially the bond market. (And Brussels!)

Since anyone can read all the Tesla stories and draw their own conclusions as to what happens next, lets stick to the consequences. The obvious one is what does it do to confidence in the Modern Disruptive Tech (“MDT”) price model: “We don’t have to pay dividends or make profits because we are a disruptive company thats triggered a paradigm in demand and made ourselves a monopoly – therefore it’s all in our stock price” ? 

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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