Home » Posts tagged 'this time is different'

Tag Archives: this time is different

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

This Time IS Different, It Just Ends The Same

This Time IS Different, It Just Ends The Same

This past weekend, I was in Florida with Chris Martenson and Nomi Prins discussing the current backdrop of the markets, economic cycles, and future outcomes. A bulk of the conversations centered around the current “everything bubble” that currently exists globally. Elevated valuations in stock prices, extremely low yields between in “junk bonds,” or intense speculation around “cryptocurrencies” all suggest we have entered once again into “bubble” territory.”

Let me state this:

“Market bubbles have NOTHING to do with valuations or fundamentals.”

Hold on…don’t start screaming “heretic” and building gallows just yet. Let me explain.

Stock market bubbles are driven by speculation, greed, and emotional biases – therefore valuations and fundamentals are simply a reflection of those emotions.

In other words, bubbles can exist even at times when valuations and fundamentals might argue otherwise. Let me show you a very basic example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871.

First, it is important to notice that with the exception of only 1929, 2000 and 2007, every other major market crash occurred with valuations at levels LOWER than they are currently. Secondly, all of these crashes have been the result of things unrelated to valuation levels such as liquidity issues, government actions, monetary policy mistakes, recessions or inflationary spikes. However, those events were only a catalyst, or trigger, that started the “panic for the exits” by investors.

Market crashes are an “emotionally” driven imbalance in supply and demand. You will commonly hear that “for every buyer, there must be a seller.” This is absolutely true. The issue becomes at “what price.” What moves prices up and down, in a normal market environment, is the price level at which a buyer and seller complete a transaction.

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

Pension Storm Warning

Pension Storm Warning

This time is different are the four most dangerous words any economist or money manager can utter. We learn new things and invent new technologies. Players come and go. But in the big picture, this time is usually not fundamentally different, because fallible humans are still in charge. (Ken Rogoff and Carmen Reinhart wrote an important book called This Time Is Different on the 260-odd times that governments have defaulted on their debts; and on each occasion, up until the moment of collapse, investors kept telling themselves “This time is different.” It never was.)

Nevertheless, I uttered those four words in last week’s letter. I stand by them, too. In the next 20 years, we’re going to see changes that humanity has never seen before, and in some cases never even imagined, and we’re going to have to change. I truly believe this. We have unleashed economic and technological forces we can observe but not entirely control.

I will defend this bold claim at greater length in my forthcoming book, The Age of Transformation.

Today we will zero in on one of those forces, which last week I called “the bubble in government promises,” which I think is arguably the biggest bubble in human history. Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago.

Earlier this year I called the pension mess “The Crisis We Can’t Muddle Through.” Reflecting since then, I think I was too optimistic. Simply waiting for the floodwaters to drop down to muddle-through depth won’t be enough. We face an entire new ocean, deeper and wider than we can ever cross unaided.

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

This Time Is Different!

If someone were to ask us what year it was, we would probably politely answer that it was 2016, curious to find out whether the inquirer was a) very confused, b) had only recently awoken from a coma and was still unsure of his when-abouts, or c) was a time traveler who got temporarily lost.

In the unlikely case that we should find ourselves unable to remember the year with sufficient precision to ensure a reliable answer, we’d probably consult a calendar. We recently found out that a great many people actually seem to be uncertain about what year it is. Or at least many mainstream media appear to think so, as they have launched an intense awareness campaign.

Specifically, numerous people seem to think it is still 2008. Wish that it were so – we’d be eight years younger. It all started on 24 August 2015, when two publications apparently discovered independently of each other that is was no longer 2008 and decided that this information should be urgently imparted to the rest of humanity. It all started with marketplace.org admonishing its readers to engage in mnemonic exercises so as not to forget:

1-Marketplace-dot-org-Aug-24-2015If you repeat it often enough, remembering it will eventually become second nature…  Photo via marketplace.org

On the very same day, NPR noted that a number of economists agreed: it was indeed no longer 2008. Incidentally, this was actually a correct estimate, as it was clearly 2015 at the time. It was presumably good though that some reassurance on the point was provided by experts – that is apparently helpful with averting panic attacks:

2-NPR Aug 24 2015Lay your calendar-related phobias to rest pilgrims!

However, these efforts were evidently insufficient: general confusion about the precise year we are in must have promptly resurfaced in early 2016. In the interest of keeping the general population in the date-loop, USA Todayhad the following information on its January 8 front page:

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

This Time Isn’t Different

THIS TIME ISN’T DIFFERENT

Last year ended with a whimper on Wall Street. The S&P 500 was down 1% for the year, down 4% from its all-time high in May, and no higher than it was 13 months ago at the end of QE3. The Wall Street shysters and their mainstream media mouthpieces declare 2016 to be a rebound year, with stocks again delivering double digit returns. When haven’t they touted great future returns. They touted them in 2000 and 2007 too. No one earning their paycheck on Wall Street or on CNBC will point out the most obvious speculative bubble in history. John Hussman has been pointing it out for the last two years as the Fed created bubble has grown ever larger. Those still embracing the bubble will sit down to a banquet of consequences in 2016.

At the peak of every speculative bubble, there are always those who have persistently embraced the story that gave the bubble its impetus in the first place. As a result, the recent past always belongs to them, if only temporarily. Still, the future inevitably belongs to somebody else. By the completion of the market cycle, no less than half (and often all) of the preceding speculative advance is typically wiped out.

Hussman referenced the work of Reinhart & Rogoff when they produced their classic This Time is Different. Every boom and bust have the same qualities. The hubris and arrogance of financial “experts” and government apparatchiks makes them think they are smarter than those before them. They always declare this time to be different due to some new technology or reason why valuations don’t matter. The issuance of speculative debt and seeking of yield due to Federal Reserve suppression of interest rates always fuels the boom and acts as the fuse for the inevitable explosive bust.

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

Indeed This Time Is Different: Because It’s Far Worse

Indeed This Time Is Different: Because It’s Far Worse

Suddenly the narrative that “everything is awesome” is showing to not be as “awesome” as it was first proclaimed. Merely a few months have passed since the ending of QE and praises of awesomeness everywhere are morphing into questions more akin to “Oh no: not again!” And with that we are now watching those who pushed, pulled, and levitated that narrative scramble desperately to push another narrative back onto the stage that worked so many times before: “Every sell off over the last 6 years has shown to be a profitable buying opportunity.” i.e., Just buy the dip (JBTFD). Yet it would seem these dips; are far different.

Just for context, over the past week, if you were one of the few remaining “home-gamers” still watching CNBC™, you would have been delighted to see once again their host Jim Cramer go through great pains to explain why he discounts the idea that we’re in a bubble to once again like ringing a bell (he uses buzzers and gongs I believe) the indexes sell off in dramatic fashion bringing back memories of Bear Sterns. As of today any gains for the year have been quelled. But not too worry, for he also contends you should have “dry powder” at the ready. i.e., Be ready to “JBTFD.”

My thoughts? “Investing” isn’t going to be so easy this time. Why? Let me be so bold to use the same meme touted by the likes of those who sold it: Because, it truly is – different this time. Without QE, not only is there no one buying. What’s far, far, far, (did I say far?) worse is: There’s no one to sell too!

 

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

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress