This society has a lethal addiction to cheap money. One that comes with an exorbitant price tag: Super asset crash at the zero bound, sans bailout. The Fed is following the exact course of action that will ensure they have neither interest rates to cut to save the economy, NOR QE to deploy to save the imploded asset bubble. History will say that the Fed and Congress were too busy front-running retail bagholders in the stock market to notice the bubble was out of control...
Many people don't like my writing style, because I am biased towards the bearish point of view. I leave nothing to the imagination. More importantly, I don't pander to idiots. The predominant writing style on the other hand, spews multiple opinions across the full spectrum of IQ and leaves the reader to get buried by the ball of confusion. Monetizing useful idiots is by no means limited to Wall Street in this era.
More importantly, I personally would never pass up this once in a lifetime opportunity to point out how fucking stupid this species has become. Looking back from an historical standpoint, this era will be the new 1929 - whereas that era stood for almost 100 years as the apex of insanity, per legendary investor Jeremy Grantham, the insanity of this bubble far exceeds that one. Did anyone alive twenty years ago believe they would see a Dotcom bubble bigger than the original one? Or a housing bubble bigger than 2007? Of course not, but here we are with both at the same time. The pandemic arrived at an unfortunate time because the cycle was already in its late stages. Many companies that had borrowed excessive amounts of cheap money were already starting to implode. However, the pandemic and its "special lending programs" threw them a lifeline to double down on balance sheet impairment.
On the topic of the Tech bubble, the delusion that abides this bubble is that overvaluation is limited to the Ark ETFs and the profitless junk issued by Wall Street at double the rate of Y2K. That junk bubble has been collapsing since LAST February. Since that time there has been a massive rotation to "quality Tech". A rotation that has only amplified the overvaluation of this era's Tech behemoths, which as of December reached the same extreme as Y2K:
"The dramatic fall in some of the "flaky" parts of the stock market so far this year has followed the paths of previous implosions, including the bursting of the dotcom bubble in 2000"
These mega caps: Apple, Microsoft, Google, Amazon, Facebook are also at the happy intersection of the LARGEST stock market bubble, which is the passive indexing bubble. What some of us call the "Dumb money bubble". Michael Burry warned that passive indexing was creating a bubble of monumental magnitude which would lead to MOAC: Mother Of All Crashes. But then he capitulated, because this madness went on too long. The very protagonist of The Big Short couldn't fight the Fed any longer. 2008 was a mere micro-subset of this current bubble.
It's no secret that the Tech sector has driven the majority of gains since the 2009 low. When the pandemic hit, investors rotated out of cyclical reflation trades into Tech stocks which were deemed "safe havens" from lockdown. That set off a decade high blowoff top in the spirit of the Y2K date change melt-up which capped off the 1990s internet bubble.
We can surmise that we've seen peak Amazon as the pandemic drove massive online sales at the expense of small service businesses. However, now sentiment towards durable goods is at a record low:
I don't know much about NFTs, I just know they're worthless. I was in the IT industry long enough to remember the "hype cycle" which was the cycle of hype that every new technology went through - the highs and the lows. Right now the Crypto space is coming off its all time crack high. This bubble will explode and then from the ashes we will find out if Crypto has any value beyond paying porn stars and child traffickers, off the books. Because right now that's it's only "utility" aside from bankrupting latecomer speculators.
Which gets us to this era's housing bubble. For the past decade HGTV has been on in the background in our household, as every home in the U.S. seemingly got remodeled to all white interiors and stainless steel appliances. The modern style being a replica of an institutional insane asylum.
To say that we've mass overbuilt and commodified the housing stock is a ludicrous understatement. We've basically created a formula for mass bankruptcy on an industrial scale.
Last year, Zillow made news because they were EXITING the home buying business. That news should have been a massive warning as to what is wrong with this current housing market: Robo buying. Flipping houses on an industrial scale.
"Wall Street and Silicon Valley have already transformed U.S. housing markets since the 2008 financial crisis, which had its roots in real estate"
The millions of foreclosures in the housing collapse created new opportunities for global investment firms to buy homes at scale, becoming corporate landlords controlling tens of thousands of homes"
The sheer irony is unbelievable. Wall Street creates a financial crisis that explodes the housing market at all time highs. Then, they come in at the bottom and buy up all the houses using cheap money leveraged 100x. All of which is leading to an even BIGGER housing crisis this time. In 2008, most of the leverage was in subprime, now the entire market is over-leveraged.
Which makes today's headline that much more dire:
Contrary to popular belief, there will be no bailout from Idiocracy this time.
