Saturday, March 28, 2020

Return On Intelligence (ROI) Is Rising

For over a decade straight, being a willful idiot had high return on investment. Those days are over. From now on, being a denialistic fool is fatal. We are now witnessing the extreme downsides of ad-sponsored pablum...

This week I heard Fed chief Jay Powell say that the U.S. economy was in a good place going into this biblical crisis. Nothing could be further from the truth. Not only were monetary policy reserves the lowest in history relative to the cycle, but the repo crisis was out of control, the deficit was record wide, and GDP was slowing. Ex-debt, the U.S. was already in recession prior to the Coronavirus. Meanwhile, the repo crisis that began last August amid record Treasury issuance, is about to get 3x worse due to the just signed mega stimulus bill.

We will now see how the Fed can rescue every asset class in the world at the same time as the Treasury is collapsing global liquidity 3x worse than the 2019 repo collapse.

Picture this x 3:

No surprise, corporate debt issuance skyrocketed to a new record this week on the heels of the Fed's entry into the corporate bond market.

"Still, the record bond issuance came at a cost. The investment-grade bond index soared to a roughly 350 basis point spread over U.S. Treasuries, compared to a low of 100 basis points, as borrowing cost even for the most credit-worthy companies soared"

While the investment-grade bond market is booming, there has been no new issuance of junk-rated bonds by U.S. companies since March 4, the longest lull since the 2008 financial crisis."

As I said, the Fed can buy some soon-to-be junk bonds in the corporate bond market if they want, but they are price takers. They are in no way controlling the cost of debt:

The decade of non-stop lying now just went into overdrive. The carbon harvest will be biblical in scale.

On the right, many Faux News acolytes are still propagating Trump's hoax theory. Which means that many at-risk individuals, particularly the Trump elderly, are foolishly exposing themselves to the virus. Red state governors are going out of their way to ignore advice from the medical profession:

"In recent days, a growing contingent of Trump supporters have pushed the narrative that health experts are part of a deep-state plot to hurt Trump’s reelection efforts by damaging the economy and keeping the United States shut down as long as possible"

Mississippi’s governor issued an order defining almost all businesses as “essential” — including auto repair, bars and restaurants"

I actually think they are partly right. The liberal left is far too willing to ignore the economic consequences of this shutdown. I don't think it's a hoax however, I think it's because the medical profession are not trained to consider economics. I also agree that there is now a political aspect to seeing this as a way to take down Trump. As if he needs any help.

Nevertheless, the liberal media are convinced that re-opening the economy would be the worst possible decision. In their minds, this shutdown is all temporary and their 401ks will be at all time highs within a year. However, when they come to realize this is a new depression. When they realize their kids are going to be living at home forever. When they realize their ludicrous levels of college debt are non-amortizing. They will see this differently. In the meantime, they are too busy walking the plank of well-practiced faux outrage to realize there is NO SAFETY NET beneath this economy anymore.

In other words, there is now large amounts of LETHAL politicized disinformation on both sides. One side is medically lethal, and the other side is economically lethal.

Both sides are trapped in a groupthink circle jerk of like-minded dunces. Neither side is capable of accepting the truth anymore. That's what a decade of intellectual pablum will do. 

As always, the lies are embedded within the underlying assumptions. Safely tucked away where they won't be questioned. Always the right questions aimed at the right set of "guests", pre-approved to blow smoke up everyones' asses. Everyone gets what they want - their own ad-sponsored version of what won't happen.

Telling the truth has come at a high social cost over the past decade. We now live in a populace that is instantly triggered by inconvenient facts and data. Preferring to curl up in the fetal position and be served infotainment pablum. Nevertheless, the return on intelligence is arriving right on time - both in terms of our health and finance. For those who decided they didn't want to be a levered call option on an age of rampant self-delusion.

The longest cycle in U.S. history, that somehow ended abruptly "without any warning", right in the middle of a mid-cycle adjustment.