Friday, March 4, 2022


The COVID pandemic was the excuse for inflating human history's largest asset bubble, which is now imploding. Now the war in Ukraine is concealing the end of the cycle as commodities go late stage parabolic. Rampant fools are incapable of making the connection between today's risks. Which is why we face a 1970s oil shock, a 1998 Russian debt default, a Y2K Tech meltdown, a 2015 Emerging Market implosion, AND a 2008-era Fed more concerned about inflation than risk. Putin's economic warfare strategy is M.A.D.: Mutual Assured Destruction...

Every economist knows that inflation peaks at the end of the cycle. That's Econ 101. Bottlenecks accumulate during the expansion and reach their peak late in the cycle. The COVID pandemic exacerbated these bottlenecks due to the global supply chain disruption which cleared out store inventories. During the lockdown consumers switched from buying services to buying durable goods. The inventory logjam caused corporations to move away from the "just in time" inventory model back to stock-piling inventories which has kept the ports backlogged with shipments due to double ordering. 

On the labor side, three million Boomers left the workforce amid 20 million layoffs. Per tradition, the U.S. laid off far more workers during the pandemic than any other developed nation. TWENTY years of employment was lost in early 2020.

"It's much harder for workers in their 50s and 60s — or older — to re-enter the workforce after a period of unemployment, due to persistent ageism in corporate America"

So it's likely that many of those who left jobs got discouraged and chose to retire instead"

Now employers are crying that they can't find enough workers. Does anyone remember the paycheck protection program? It PAID payroll costs for employees so they wouldn't have to lay off workers. Free money. And yet, they still laid everyone off. 

Every investor should know that commodities peak at the end of the cycle. They are a late cycle trade. If you see commodities leading, you can be sure that the Fed is raising rates and recession risk is rising. 

And yet, Wall Street is currently pushing their clients into all of these end of cycle dead end trades.

Case in point mining stocks, which exhibit a perfect corrective wave form vis-a-vis the 2008 high:

Same with wheat. It's corrective. NOT a new bull market.

Oil is three decade overbought and the most volatile since 2008, because the West is now moving towards a potential FULL embargo on Russian oil. The net effect would cause a super spike in oil prices with risk assets heading in the opposite direction. 
Such a disastrous move would accelerate financial meltdown beyond its current widely ignored pace. 

"Oil from Russia will be foreclosed from the global market here at some point and we are already seeing commercial activity reduced, particularly as it relates to Russia exports via maritime assets and that is already hitting the market...“These are barrels that we cannot make up, so that’s why this market is on tenterhooks”

Optimists are calling the net result of this total disaster "stagflation", meaning slow global growth and high inflation. It's their way of locating the pony in the horse shit.

However, these limp dick cassandras can't bring themselves to look into the abyss staring back at them. They too are ignoring the risk of outright deflationary collapse. No one uses the word recession anymore, much less depression which is where this is all VERY obviously heading. 

For a while, bullish pundits got away with ignoring all of the growing risk, but this week risks crossed into the red zone. In addition, to all of the above risks, Russian default is now on the table.

"The Russian state is set to fail to pay foreign bondholders a coupon due on a bond for the first time since 1998"

“They clearly see this as an economic war, and this is their way of striking out at foreigners”


Putin's goal was to lure the hubristic West into an economic war they have no chance of winning. So far his plan is working great. His timing could not have been better. The dominoes were already falling and his war has accelerated the collapse.

This week, Nasdaq lows (8 week average) highest since...


Now all we need is a TOTALLY clueless Federal Reserve. Which we got during two Congressional testimonies this week as J. Powell confirmed the Fed will be raising rates in March. In addition, balance sheet reduction is on the table when tapering ends this month. 

For gamblers who are now trapped in end of cycle inflation trades, this is for YOU: