Tuesday, May 9, 2023


 "There is no political solution to our troubled evolution"

Bulls are trapped in a latent Idiocracy with no way out and no way of knowing the risk they are taking. Each side of the political aisle is cheering on their own stooge leaders. Waiting for the big  political "win" when they push the economy off the fiscal cliff.

The pandemic was the largest combined fiscal and monetary stimulus in world history. Followed by the largest fiscal and monetary reduction in history.

Meaning, we are right now enduring the largest boom and bust in history. 

The largest asset bubbles in the past 100 years were 1929, 2000, 2008 and 2020 when measured statistically relative to historical baseline.

January 2022 Jeremy Grantham:

"All 2-sigma equity bubbles in developed countries have broken back to trend. But before they did, a handful went on to become superbubbles of 3-sigma or greater: in the U.S. in 1929 and 2000 and in Japan in 1989. There were also superbubbles in housing in the U.S. in 2006 and Japan in 1989. All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average.Today in the U.S. we are in the fourth superbubble of the last hundred years"

Does anything strike you as odd about these years: 1929, 2000, 2008, and 2020? It should. 

Fully 70 years lapsed between the Great Depression and Y2K, then in a span of 20 years there were THREE 3-sigma superbubbles in the U.S. That is statistically impossible assuming a normal distribution. Therefore we live in an era of unprecedented Black Swan tail risk. Meaning this is the riskiest market period in world history without comparison. 

This is why I had to start writing my own blog. Because we live in an era of statistically impossible boom and bust, and yet today's bullish pundits all assume that the next 100 years will be just like the last. They ignore the fact that in this era it is totally impossible to extrapolate a bullish market future from the recent past.   


Take a look at the chart above and in particular 1980 aka. "Morning in America". That was the Reagan revolution and it was kicked off by the Volcker gambit. Meaning Fed chairman Paul Volcker used high interest rates to kill the 1970s inflation and then markets took off, unleashing a two decade stock rally that culminated with the Y2K superbubble. Volcker's gambit worked, because that was demand side inflation driven by the strongest middle class in U.S. history. Today's inflation is driven by rampant corporate profiteering which is relentlessly imploding the weakest middle class in history when measured by labor share of GDP, benefits, job security etc. Meanwhile, Volcker had an 19% Fed rate to cushion the inevitable massive recession. He used 10% of that on the way down. This Fed has a 5% Fed rate to cushion the downside of this impending recession that is imploding what is left of the middle class after three successive boom and busts in two decades. 

What we are witnessing in real-time is the END of Globalization which has been the dominant economic force for the past 100 years. Which is what makes Warren Buffett so ridiculously out of touch with reality. He is extrapolating his own 93 years since 1930 into the indefinite future.

As if there will be ANOTHER middle class to implode. 

Therefore it's fitting to watch our political leaders push this Titanic off the cliff with their fiscal gong show. As we see below, the debt always rises in recession. It exploded after 2008 and again during the pandemic. And yet here they are actively pushing the U.S. into recession out of their fake concern for the national debt. 

In summary:

"What the wise man does at the beginning, the fool does at the end" - Warren Buffett