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No Bubble Here, Folks!
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!
Fed and Treasury Steer Their Unsinkable Ship toward Iceberg
Fed and Treasury Steer Their Unsinkable Ship toward Iceberg
This past week we got to observe Fed Chair Jerome Powell and the US stock market andthe US bond market do everything I said they would do in their complicated shuffle of ships-and-icebergs:
“I’m sure many helium-headed stock investors believe the lilly-livered Fed will turn tail and run from its goal of letting inflation rise as soon as bonds begin to clobber stocks more seriously…. I believe the Fed is more committed than ever to raising inflation as it has been saying it wanted to do for years.”
While bond yields had already begun to rise and compete against stocks, the Fed stayed the course, iceberg dead ahead. As a result, longterm bond interest rose even more because the Fed did nothing to jawbone the idea of increasing its bond-buying QE to take interest rates back down (which it accomplishes by purchasing US government bonds from banks to take them off the market, putting them on its own balance sheet).
You see, the Fed is — I believe — caught in its own catch-22. Usually, to lower interest (in order to stimulate the economy and hit the higher inflation number the Fed says it is targeting), the Fed would buy more bonds; however, buying bonds and adding them to its balance sheet tends to create more money in the system, and the bond market is already afraid of rising inflation because much of the new money is now going into the hands of average people. (This game only worked when all new money was going into the stock market.)
As a result, aiming for higher inflation by purchasing more bonds will cause the reinvigorated bond vigilantes to up their demand on bond yields to cover inflation, making it impossible to lower longterm yields by purchasing bonds.
…click on the link above to read the rest of the article…
Dr. Fed Frankenstein Kept Alive by Zombies
Dr. Fed Frankenstein Kept Alive by Zombies
Did you know Dr. Frankenstein created a monster that stays alive to this day by eating zombies? Neither did the zombies. Neither, apparently, did Dr. Frankenstein. In fact, the zombies, being braindead as zombies are, do not realize that they are also keeping alive the diabolical doctor who made the monster that is eating them.
This little article, however, is going to tell you how all of that has become the strange case of the world as we all know it today. And, at the end of the article, I’m going to give everyone access to the first “Patron Post” I wrote as my thank-you to supporters who chose to keep this blog alive at the close of last year. That post was titled “2019 Economic Headwinds Look Like Storm of the Century.”
Before I do, I want to recap 2019 by shining a light on the occulted diabolical nature of the single most important economic event this past year … so that you can read the article in an appropriate frame of mind. You would not, after all, watch a horror movie without first turning out the lights to set the mood. In this case, however, I must also turn on a single small lamp to shine a light on the face of the monster hidden the dark corner of the banking world. Then we will be ready to review the article in context of all that transpired.
One purpose I had for laying out what I thought would be the prevailing headwinds in 2019 was, of course, to help people realize what they should keep their eyes on for their own sakes. That may or may not give them information they factor into investment decisions, but investments decisions are not at all what this blog is about.
…click on the above link to read the rest of the article…
Repocalypse: The Second Coming
Repocalypse: The Second Coming
This little monster that feeds beneath the surface of global banking at its core briefly raised one ugly eye out of the water as 2018 turned into 2019. I wrote back then that the interest spike we saw in the kind of overnight interbank lending known as repurchase agreements (repos) was just the foreshock of a financial crisis being created by the Fed’s monetary tightening. I said the Fed’s continued tightening would eventually result in a full-blown recession that would emerge, likely out of the repo market, sometime in the summer. In the very last week of summer, the Repo Crisis raised its head fully out of the water and roared.
When I first wrote of these things at the start of 2019, the Fed had only been up to full-speed tightening for three months, and already it was blowing out the financial system at its core. The stock market had just crashed with the onset of full-speed tightening just as I had said it would. It fell hard enough to where the only index holding just one nostril above the icy water was the S&P 500 at a 19.8% plunge. Even that holdout briefly dipped its last air-hole under water in the middle of the day (i.e., below 20%), but didn’t stay below for the count. All other major indices and most minor ones took the full polar-bear plunge into the deep, dark water by this day in December.
If not for the obvious bullish bias in all reportage everywhere (except alternative media), the market would have been declared a new bear market at that time (based on the market’s own historic standards where a 20% fall is a bear market), and any bull market after that would be a new bull market, not what is now called “the longest bull market on record.”
…click on the above link to read the rest of the article…
It’s Been a Great Recession for a Few; Let’s Do it All Again!
It’s Been a Great Recession for a Few; Let’s Do it All Again!
This month the economic expansion brought to you by your Federal Reserve and by US government largess becomes the longest expansion in the history of the United States! That’s something, right? Something? Let’s take an honest look at what we now call great.
By “the longest expansion” we mean the longest period in which US GDP has been growing without a recession. Now, that’s something to crow about, right?
Not so fast for many reasons. It’s also been the most anemic expansion on the books, and it’s not too hard to see why it’s been the longest, having nothing at all to do with a great economy. It has cost us far more than any expansion (by an order of magnitude) because we’ve piled up ten times the national debt over any amount we accumulated during previous expansions. (I’ve said before, it’s easy to let the “good times” roll when you are buying it all on the company credit card.) We also quadrupled the size of the size of the Fed’s balance sheet. That didn’t cost anything, but we sure didn’t get much bang for the buck! We actually got less bang than in any previous expansion!
The permanent recession
Sure, we got outstanding growth in stocks, but growth in business revenue has been pathetic. Growth in corporate development has been even worse (i.e., new plants, improved productivity, etc.) Growth in earnings was decent, except for the fact that it is entirely a feint because it was created mostly by reducing the numbers of outstanding shares over which earnings are divided, not so much by growing business. (Why do you think Wall Street prefers to talk about “earnings per share, ” EPS, instead of just actual profits?)
…click on the above link to read the rest of the article…
Liquidity Stress Fractures Begin to Show in the Federal Reserve System
Liquidity Stress Fractures Begin to Show in the Federal Reserve System
In my January Premium Post, “An Interesting Interest Conundrum,” I laid out how the Federal Reserve was losing control over the Fed funds rate — a loss of control over its bedrock interest rate that indicates financial stresses are building in the banking system that increase the risks from runs on the banks:
After the financial crisis, when there was a risk of runs on banks, the Fed … require[d] the banks to hold more money in reserves … as a regulation safeguard when the Fed was trying to avoid total economic collapse. Deposits, after all, are liabilities because depositors are guaranteed they can demand instant cash at will. Depositors get extremely unhappy if this guarantee is not fulfilled. That looks something like this:
And you don’t want that.
The Fed funds rate is the Fed’s target rate for the amount of interest banks charge each other to make overnight loans to each other from their reserves. In a crisis, when banks need their reserves, the interest they charge each other will naturally skyrocket. To keep the monetary system from freezing up because banks won’t loan to each other, the Fed tries to push that rate down.
During the Fed’s Great-Recovery bond-buying program (quantitative easing), aimed at pushing that rate down, the Fed deposited huge amounts of money created out of thin air into bank reserve accounts to make sure they remained flush so there would be no panic runs on banks, but banks don’t like just sitting on huge piles of money, instead of making even more loans with those piles, especially after the crisis abates. The Fed, however, wanted them to continue to maintain those reserves in case crisis returned.
…click on the above link to read the rest of the article…
Epocalypse Ahead on Highway to Hell for Global Economy and US Stock Market
Epocalypse Ahead on Highway to Hell for Global Economy and US Stock Market
First I said I believed the US stock market would plunge in January, but I also said that January would not be the biggest drop, but just the first plunge that begins a global economic collapse: the big trouble for the economy and the stock market, I said, would show up in “early summer.” That’s when the stock market crash that began in January would take its second big leg down, and global economic cracks would become big enough that few could deny them.
(Now I’ll add a prediction — that even worse will unfold in the fall and early winter … unless summer becomes so bad that central banks rapidly reverse course on unwinding their balance sheets and raising interest; but I think they will stay their promised courses into the fall and winter and headlong into a global economic crisis.)
The stock market did plunge in January and on into February, with the Dow eventually taking its largest single-day point drop in its long history. That drop busted the Trump Rally, and the market never recovered, leaving US stocks (and stocks all over the world) shattered in “correction territory” for half a year. With a half a year for perspective now, here is a look back what that event did:
Global Stocks (except US), US stocks, and too-big-to-fail bank stocks. Where did the market trend abruptly change for all?
I’ve waited patiently through the first half of the year to talk in depth about how my January prediction faired because I felt we need many months in order to discern whether a trend has really been broken.
…click on the above link to read the rest of the article…
Epocalypse Soon: The Great Economic Collapse is Happening
Epocalypse Soon: The Great Economic Collapse is Happening
I use the term “epocalypse” to name the last days of the global economy as we know it — a global economic collapse of biblical proportion. It is economic, epochal, an apocalypse that will change the world and a collapse … all in one word that sounds the right size for what I’m talking about. Call it the “Great Collapse” or the “Epocalypse.” Whatever you call it, it’s about to change the world.
I am referring to an economic crisis so big that the global economy will be forever different after those days. This economic collapse has already begun throughout the world, but I am holding off on using the title “Epocalypse Now” until the US stock market joins the crash. That’s the point at which we’re all in (i.e., at a level where everyone knows it and denial that it is happening falls apart). I anticipate making that call in a matter of days now. Here is where we stand at present:
Economic collapse is already global
Open your eyes to a wider scope than just the US stock market, and it’s as if a fog lifts all around you to reveal a war-ravaged landscape. It may not be like the landscape described in the New Testament book, The Apocalypse (The Revelation), but it’s moving in that kind of direction. Let me describe what is already unfolding in case you haven’t caught the big picture.
- The energy crash is certain to worsen. The news last week that OPEC is not going to lower output, makes it clear that OPEC is in the energy price war for the duration. Driven by the Saudis, OPEC nations will assure oversupply until they see several major oil companies in the US collapse.
…click on the above link to read the rest of the article…
