The first question archaeologists will have to answer about this era is, what is the point of freedom of speech if it culminates in non-stop lying? They will come to realize that freedom of speech is meaningless in the hands of a brainwashed Idiocracy living in the fetal position. All it means is freedom of disinformation. Everyone knows that the Russian and Chinese governments control the state media. Therefore everyone in those countries discounts what they say. However, most Americans are under the delusion that corporate media is telling a version of the truth. Their own politicized version of truth. Disinformation is like religion - everyone thinks they're right and everyone else is wrong. The combination of mandatory lying and naive gullibility is what has combined to create the greatest optimism of the entire cycle:
Social media weaponized lying against the populace, leading to this human history's biggest groupthink circle jerk. We learned all this during the election in 2016, but since Trump won, nothing has changed since that time. Quite the opposite, now all of Trump's lies have been weaponized on social media.
Per the theme of this post, current events are playing out very similar to 1929/1930. In late 1929, the market peaked and then crashed. The market stabilized in early 1930 and rallied in a three wave retracement that lasted five months. A global trade war broke out in the Spring of 1930, but still optimism remained high. At the end of April, the party ended, and the market tanked -90% in two years. Herbert Hoover was punted from office.
This time around, the Global Dow peaked in January 2018 two years ago. On a dollar basis only the U.S. has subsequently made new highs. Within the U.S. market, economic cyclicals (Banks, transports, small caps, retail, autos, industrials ex-defense) peaked in October 2018. U.S. GDP growth peaked in 3rd quarter 2018. Stock buybacks peaked in 4Q2018.
Dow Theory never confirmed this dumb money bubble:
In the meantime, global central banks squandered all of their dry powder creating the Trump super bubble. A bubble that has pushed U.S. momentum stocks to multi-decade high valuations. In the process they created an unsustainable valuation gap based solely upon momentum. They also inverted the relationship between global GDP and stock prices for the first time in world history:
https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WEOWORLD
Regardless of the Tech bubble sugar high, what we are witnessing right now, is the second rollover of social mood from a lower high.
The 1930 analog to super crash.
In summary:
Central banks have created a sugar high super bubble in the context of a burgeoning global depression. Papered over with simulated prosperity aka. printed money.
In the event, they have pumped up U.S. stock prices to cycle highs, while creating bubbles in global real estate, municipal bonds, corporate bonds, and global sovereign debt.
Which means they have inflated liabilities in lockstep with assets. When the follow-on explosion takes place, only the asset values will fall. Liabilities will remain at their bubble levels. Fools who believed bigger fools will be trapped with non-amortizing debts, with no ability to sell the assets.
As we see from global GDP above, today's EconoDunces have not taken notice of the fact that Central banks have lost their control over the deflationary global economy, and now only have control over asset prices. Monetary policy has lost its economic efficacy at the zero bound.
Which has created the lethally chasmic gap between fantasy and reality, as evident in the bond market versus stocks. As the economy deteriorates, low bond yields have pushed more and more money into stocks at the point at which corporate earnings are about to fall off a cliff. Nevertheless, well-conditioned gamblers are eager to front-run central banks into stocks.
Throw in an existential election, and those who are party to this fraud must soon ask themselves what role in this epic con job did they play?
And when did they stop believing in the truth?
