THE BIG BANG THEORY

Gamblers are betting the worst is over. Unfortunately, the worst hasn't even started yet...

The only thing that can bring down inflation quickly is a market crash. Hence the Fed has signaled they will keep it up, until their job is done.

"Good news": 

The Dow just closed November with the largest two month Dow rally in history (75+ years). Powell was hawkish, but the market didn't care. Nothing could derail this manic melt-up. This impending December rate hike is not a pivot, it's not a pause, it's merely a "step down" from .75% to .5% with ongoing potential rate hikes in 2023. We've entered the Twilight Zone in which a .5% rate hike went from being unthinkable a year ago to good news now. Per Hendry's Iron Law of Disney markets, bad news is constantly conflated as good news. In addition, what bad news obtains has been magically pushed into 2023. Another important concept that has been forgotten is something called "conflict of interest".

Powell indicated the main source of ongoing inflation is the  tight labor market which is not expected to weaken markedly any time soon. The labor market mismatch is primarily due to two million early retirements that occurred during the pandemic. Ironically, due to high stock prices caused by the Fed. Which means that instead of increasing the supply of workers through higher labor participation, the Fed's goal is to reduce the demand for workers. The Fed is of the belief that because job openings are extremely elevated (see below), they can produce a soft landing. However, as we see from the chart, the only way to bring down job openings historically is through recession. Bank of America agrees this is the most likely outcome:

Notably, the Fed never mentioned record corporate profit as a source of inflation. Which I should remind everyone - but mostly the idiots at the Fed - that record corporate profit is AFTER deducting "inflated" employee wages. How could wages be the source of the problem when profits are up 45% in three years? 

Here is what BofA has to say about the relationship between jobs, recession, and corporate profits: 

"The prospect of negative job growth and a recession probably won’t bode well for the stock market. When the economy contracts, corporate profits usually deteriorate"

Bank of America’s head of U.S. equity and quantitative strategy Savita Subramanian recently said that the S&P 500 is “expensive” and “super crowded.”

Despite all that, BofA sees stocks flat year over year. They predict a mere -10% downside for S&P profits. Below we see how that looks historically. It would be 1/3rd the profit decline of the least worst recessions in 30 years. Despite the fact that the CPI is at the highest level in 40 years. It's all part of the stagflation fantasy now propagated by Wall Street. It's the new permanent plateau of delusion.

Imagine if profits declined a moderate 30% AND stocks declined 30%, that would mean stocks are STILL expensive.   

Per the stagflation thesis, stocks are good, bonds are bad, so no surprise we see that retail investor allocation to stocks remains high through November. I am still of the belief that long-term Treasury bonds will substantially outperform stocks on both a relative and absolute basis in 2023. 

Per the title of this blog post, I would not be the only unwavering bearish blogger if I did not point out that this will not be a linear process as predicted by Wall Street.  

Which is why we must look to the 2015/2018 analogs which were the only two years in the past two decades that featured a December rate hike. And they were both debacles.

 

I contend that the Santa rally is ALREADY over. It ended a month too soon this year as evidenced by the biggest two month Dow rally in history.

The CNN greed/fear index just flashed its highest reading of 2022. This Dow pattern is similar to last year, except the Dow is peaking a month early. In addition, every spike in the greed/fear index was a rally top in 2022. And of course last December didn't have a rate hike. 

Worse yet, we appear to be approaching what Elliott Wave technicians call the "Third wave down". Which means that the decline in the first half of 2022 was the first wave down. The two rallies in the second half were the second wave up. While the waves are not as clear in the S&P 500, the waves are much clearer in this chart of regional banks, which also predicted the 2020 crash. How could banks predict a pandemic? They didn't, the bank chart merely predicted that stocks were about to go down for ANY reason. 

In summary, Wall Street doesn't predict black swan events, but they should. Because a market crash is far more likely than stagflation. And when it arrives, the crash will reset all economic and market predictions LOWER for 2023. Which means this market will be STILL over-valued at a lower level and gamblers will be trapped by you know what. 

Believe it, or not. 

MORAL HAZARD DEATH SPIRAL

It's clear that today's bullish pundits don't understand monetary policy and markets. Therefore, what chance do retail investors have? They are trapped in a moral hazard death spiral...

mor·al haz·ard

"Lack of incentive to guard against risk where one is protected from its consequences"

Investors are caught in what I call a moral hazard death spiral. Having been conditioned for 14 years to buy every Fed bailout, investors are now continually front-running the Fed, thereby making the Fed’s job of bringing down inflation impossible.

Which means that the Fed must respond to every rally with a further tightening of monetary policy, which has been the theme of 2022. Once again at the peak of this latest rally, two Fed members (Bullard, Williams) have come out this week to inform investors they are too bullish. This Wednesday, Powell will give a speech ahead of the FOMC blackout period next week. The odds on bet is that Powell will once again pound markets down as he did this past summer. Markets have been rallying into slower rate hikes to begin in December, but what they are not prepared for is another hawkish ground and pound. In the chart below, we see via the Fed's "National Financial Conditions Index" that since the summer, financial conditions have actually eased. This despite four back to back .75% rate increases in a row (June, July, Sept, Nov). Now, financial conditions are the loosest since May of this year.

Bullish pundits constantly blame the Fed for policy errors, but ironically, THEY are the ones to blame for this conundrum. Clearly, they have no clue about moral hazard. By encouraging investors to buy every dip, they are prolonging and increasing monetary tightening. In the end they will succeed in imploding the economy while at the same time encouraging investors to buy stocks ahead of financial depression.

The Fed's goal is to force markets to RISK OFF, when that happens they will have cover to pivot to neutral. Ironically, over-eager bulls are preventing that from happening.

The Fed and investors are locked in what I call a moral hazard death spiral.    

The overwhelming majority of money managers now believe that stagflation is the most likely outcome in 2023. Meaning, not a soft landing, not a hard landing, a Goldilocks landing that requires only nominal de-risking ahead of time. Plausible deniability for when it explodes. 

“Central banks will tighten too much, pushing economies into a moderate recession"

The stagflation thesis assumes the Fed can avoid deleveraging of the likes seen post-2008 and post-Y2K. It fits with the so-called "worst case scenario" of 40% stock market downside as predicted by the "uber-bearish" Morgan Stanley and Bank of America. Which happens to be a mere 15% below the October lows.

The fly in the ointment is the fact that by the end of this year the Fed will have tightened almost twice as much as they did in December 2018, the last time they imploded global markets. 

In addition, this is by far the weakest Nasdaq rally of 2022. 

 

In summary, bulls and bears are both waiting for the same "event". They just have a different interpretation of its outcome. 

With two weeks until December FOMC, the odds are increasing that soon we will find out who is right. 

COLLAPSE AS USUAL

Archaeologists will have only one question when they dig this failed global empire out of the ruins...what were they thinking?

In this era, disintegration has been normalized. Denial of that fact is democratic self-destruction.   

It's been a while since my last rant on humanity, so here goes. I am reading two books at the same time right now, but I'm only part way through both of them. One is "Sapiens: A Brief History of Mankind" by Yuval Noah Harari, and the other is "The Myth of Normal" by Gabor Mate. These are clearly totally separate books by different authors and yet they have much in common. The former book "Sapiens" explains how our current constantly reinvented way of life is merely a blink of an eye in the timeline of human civilization. And the second book explains that we have normalized all of modern society's anti-social behaviours as "normal", which is leading to wholesale mental health meltdown. Both books continually highlight the primary theme that our newfound transactional corporate society is nothing like how human beings lived in the past. As predicted over fifty years ago in "Future Shock" by Alvin Toffler:

"Society experiences an increasing number of changes with an increasing rapidity, while people are losing the familiarity that old institutions (religion, family, national identity, profession) once provided"

The post industrial society will be marked by a transient culture where everything ranging from goods to human relationships will be temporary"

 

So it is that we live in a disintegrating society beset with rampant overdoses aka. suicides, mass shootings, economic and environmental collapse, and political dysfunction. And yet not one media pundit will draw a straight line from all of that disintegration back to the globalized corporate empire which is using people up at an accelerating pace. The term "myth of normal" is exactly how I would describe this entire globalized delusion, not only at the mental health level but at the macro economic level as well. We have normalized the disintegration of the middle class, which has culminated in this pandemic wealth transfer from the middle class to the ultra wealthy. During the pandemic it was the doubling of the Fed balance sheet to $9 trillion that created the colossal asset bubble, driving record wealth inequality. Interest rates were only lowered 1.5%, a mere 1/3rd of the decrease in 2008. And yet we are to believe that 0% for SEVEN years post-2008 caused 1% inflation, and 0% for two years post-2020 caused 9% high inflation. Sure.  

Nevertheless, post-pandemic, the Fed has now TRIPLED short-term rates over where they were during the pandemic while leaving the balance sheet unchanged year over year. At the rate the Fed is slowly reducing the balance sheet, it would take FOUR YEARS to get back to the pre-pandemic level. In other words, this post-pandemic tightening strategy has even FURTHER drastically amplified wealth inequality created by their moronic easing strategy. 

Which gets us to the casino. 

One of the insights from "Sapiens" is that human beings are the only species that are capable of what the author calls "imagined realities". He asserts that imagined realities are what creates and sustains large scale organizations and empires - because they bring together millions of disparate people under a set of shared beliefs, be those real or imagined. Think religions and nation states.

For some long time readers, the term "imagined realities" is very familiar, because it's the EXACT SAME term hedge fund manager Hugh Hendry used in December 2014 to describe the post-2008 monetary Disneyland. He asserted that quantitative easing could temporarily conjure the illusion of economic recovery in markets. But that inevitably the policy would be overused until markets and the economy exploded at the same time:

"The worse the reality of the economy becomes, the more we take on the reflexive belief in further and dramatic monetary expansion and the more attractive the stock market looks"

Hendry went on to say that as a money manager it was not his job to guess when it would all implode and it was his job to maximize return on capital in the meantime. He lost all of his investors soon after posting that. Shocking, I know. 

Back in late 2014, Hendry used the term particularly with respect to Chinese markets, which he predicted in 2015 would experience a tremendous imagined reality. 

He was right, it soared. And crashed. 

Now, their latest imagined reality is crashing, albeit from a much lower level:

"With China reporting record numbers of Covid-19 cases, more than a fifth of the country’s gross domestic product (GDP) is now under lockdown – on par with the economic impact of Shanghai’s shutdown in April, according to a new report."

  

In summary, we live in a disintegrating society beset by latent mental health meltdown due to an imploding myth of normal, and now clinging to a 100% Ponzified imagined reality. So it is that bullish pundits look to 2023 and can't imagine what could go wrong. How about everything? 

I assert that denial is the ultimate weakness, and the Sapien imperative is to survive and realize this is all in the hands of a higher power. Therefore we must see through these imagined realities before they crash and burn as they have for every other empire in history. 

Or drink cheap tequila on the linoleum and give in to total fantasy. 

As Darwin theorized, it's a personal choice. 

BLACK FRIDAY

The countdown to year-end has begun. There are only 25 trading days of widely ignored criminality left in 2022. Bears have put our credibility on the line, calling for meltdown. Bulls have put their everything on the line, calling for meltup...

This past week's Fed minutes changed nothing - another 1% rate hikes are expected between now and March. However, low volume algo manipulation is very easy around the holidays. Which begs the key question asked by bulls and bears alike - is this the beginning of the annual year-end meltup?

First off, it should be noted that as I showed on Twitter, the past two months has been the largest two month Dow rally since 1975, despite record risk.  Still, Zerohedge aka. Wall Street expect this year-end meltup to continue:

"While fundamentals remain bearish and will likely drag stocks to the low 3000s in early 2023 as recession fears overtake inflation concerns, the market technicals are extremely bullish, and growing even more so with every passing day"

Where to begin. 

First off, FYI to Zerohedge, BofA already bailed on this year-end rally last week when global stock inflows hit an eight month high. Because they view the technicals as now having become bearish.

Case in point, the Dow's biggest two month rally in almost 50 years brings the market back to the August high and ironically back to last year's low, circa Dec. 1st, 2021 which is where the year-end rally began. So you have to be hitting the crack pipe hard to believe that this year's Santa rally is just getting started.

Meanwhile, the retail sector is drowning in inventory this year. I did some personal shopping this past Monday, and I bought $150 of clothing which was marked down to $100 at the register. For once it was me who could brag about how much money "we" saved by going shopping. The wife was not amused.  

Nevertheless, investors were informed this past week that retail earnings were "better than expected". Now compare this November to last November and you can see why I am a tad skeptical:

CNBC: Best Buy Shares Surge On Raised Outlook

"It raised its full-year forecast, saying it expects comparable sales to decline about 10%"

  

"Major retailers are under intense pressure to deliver on Black Friday after several of them reported a slowdown in sales heading into the do-or-die holiday shopping season"

Retail deflation is a widely ignored warning sign of what's coming. For now however, just the middle class is imploding, while the casino class keeps buying every dip. They are oblivious to the fact that stock multiples keep getting more expensive as earnings reality very slowly reaches the market. FOMO (Fear of Missing Out) is the ultimate inflationary mindset. Panic buying before prices go higher. Clearly, bulls are still well entrenched in the inflationary mindset for now, but the technical warning signs are piling up. Whereas the Dow has round-tripped back to the August high, the Nasdaq is lagging badly. Here we see the Nasdaq 100 is well below the 200 dma while the % of stocks above the 200 dma is the SAME as late March earlier this year. That is a major bearish technical divergence. It's visual confirmation that Tech lost a staggering $7.4 trillion in market cap during the past year:

"It seems like an eternity ago, but it’s just been a year. At this time in 2021, the Nasdaq Composite  had just peaked, doubling since the early days of the pandemic"

"For the first time in nearly two decades, the Nasdaq is on the cusp of losing to the S&P 500 in consecutive years"

The Global Dow has also round-tripped back to the August high, and the RSI pattern (top pane) is very similar to the one last December. In other words, Santa Claus came two months early this year and has handily exceeded last year's fourth quarter return, but now we are to believe that this year's melt-up rally will BEGIN where last year's ended. 

Sure.

In summary, the theme of 2023 will be deflation, as frugality is already coming back into style with a vengeance for the middle class. Meanwhile, investor FOMO is about to explode with extreme dislocation. 

This past week's Fed minutes confirm that a December rate hike is a lock, which means 2022 will see the EXACT same level of Fed rate hikes that took place between 2003-2006. The last time the Fed imploded the middle class.

In other words, +4.25% (Equivalent to 17 1/4 pt rate hikes). 

And yet, the majority of today's pundits are assuming this time will work out better than last time. Given the lags in monetary policy, they have literally no basis to reach that asinine conclusion. 

They are exploiting the vacuum of lagged data which has become a con man's paradise.  

Lastly, the World ex-U.S. has already rallied off the lows as much as it did in 2019 AFTER December rate hike AND after Fed pivot.

FOMC: Fear Of Missing Crash.

ALL ONE PONZI SCHEME

Now we're just waiting for the moment when global risk markets go into what I call "FTX Mode". The point at which a declining asset class spontaneously explodes, totally unexpectedly...

The Minsky Moment:

"Over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizeable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values"

The era of financialization began with the U.S. abandoning the Bretton-Woods Gold exchange standard in 1971. It was a constraint on unlimited U.S. borrowing, so it had to go. In the event, the U.S. dollar became the world's first fiat reserve currency. Now, decades later we learn that nothing could be more lethal than an unlimited credit card collateralized by "free trade", in the hands of a generation that inherited the greatest economy in history. There goes the industrial sector and the middle class. 

What we got in return was secular deflation. Meaning that global supply far exceeds demand. Yes, even now. What passes for inflation now is end of cycle Ponzi inflation already imploding in broad daylight.

Today's inflation is the very definition of transitory - nevertheless it has been inadvertently conflated as the 1970s horror show "Return Of The Middle Class". Leading to what I call the Volcker gambit - raising rates at the fastest pace in history in the midst of a record global asset bubble collapse. Without question, the dumbest economic event we've witnessed in our lifetimes.

What's holding up the CPI at this late stage is a record increase in home carrying costs (price * interest rate) and record corporate profits. The Fed inflated the housing bubble and then they jacked up rates to make housing totally unaffordable. Driving rents through the roof and back into CPI, where the Fed concludes that rates must go higher.

 

The Fed is locked in a death spiral of their own making. Far more willing to implode the middle class than the casino class. 

Once again, Milton Friedman's assertion that "All inflation is monetary" was proven right. However, not in the traditional sense. Most economists assume that inflation is due to the expansion of the underlying currency base. Quantitative Easing was devised as a way to inject liquidity into asset markets without directly impacting the economy. The indirect effect of course is via the wealth effect which was put on steroids during the pandemic. 

One of the side effects of this multi-decade experiment in mass financialization is that at the zero bound no idea is too stupid for investment. The entire investment sector has now been 100% Ponzified. Meaning that rate of return is solely predicated upon the number of fools to follow. Therefore, it can come as no surprise that we are surrounded by a surfeit of Bernie Madoff acolytes seeking to steer the marginal dollar into THEIR preferred asset class. EVERY investment class is now a zero sum game.

Today's financial media is a direct reflection of our society - morally weak and inherently corrupt. 

Consider all of that in the context of what is about to happen. 

What I call "FTX mode". The moment at which ALL Ponzified markets meet their Minsky Moment. 

And when it all ends, we can be certain of one thing, there will be nothing left to bailout. 

YEAR-END BONUS

In my last blog post I demolished the fundamental hypothesis. Now I will tackle the technical hypothesis. In a nutshell, the entire bullish thesis is predicated upon the ongoing misallocation of capital to the stock market, just as it is with every other Ponzi asset class...

First off, many pundits are now questioning why the Fed is over-tightening. The reason the Fed is over-tightening is because the jobs market remains inordinately strong due to the fact that low paid service workers are extremely scarce and in high demand. However, at the same time we are witnessing the beginning of a white collar recession centered in the Tech sector, which is what Michael Burry has been predicting for the past year.

Which means there is a severe mismatch in the jobs market: High demand/low supply for service workers. Low demand/high supply for Tech workers. These two labour markets are totally separate and yet they lead the Fed to the same conclusion - keep tightening. It's not as if Tech workers are going to take jobs at Chipotle. At least not yet. And if they do, the collapse in total consumption will be highly deflationary. Similar to what happened when laid off manufacturing workers took jobs at Home Depot. What we are witnessing is the last stage of the decimation of the middle class.

Now on to the casino...

Stories abound as to what caused the collapse of the FTX Ponzi scheme. Because what could go wrong? What these exchanges all have in common is that they issue their own proprietary Crypto currency which they use as the medium of exchange for all trades. The FTX coin (FTT) was one of the best performing cryptos of the past two years because FTX was laundering all client cash through their own currency in order to keep it artificially inflated. The other thing they were doing is what's called "burning Crypto", meaning destroying large amounts of their own currency float in order to keep it artificially scarce. Making it easier for speculators to manipulate it higher. Then they were taking this artificial wealth and they were squandering it on everything from penthouses and drugs to political bribes to ensure their scam stayed unregulated. 

And it worked great.  

But it was all doomed to collapse because the entire business model was not built upon creating value, it was predicated upon the greater fool theory. And so it was DOOMED to collapse. 

What's more interesting is that the wave pattern for FTX coin has been 90% correlated to the Nasdaq for most of 2022. Which proves that social mood is driving ALL markets now. 

For those who are not familiar with Elliot Wave Theory, it merely posits that wave patterns are the manifestation of investor emotion in markets - greed and fear. Much of the time wave patterns are not clear, particularly when markets are not trending. Other times, they are crystal clear. 

What is the most clear is when a market is declining and rallying in a three wave correction. This pattern is highly reliable because it indicates a waning level of speculative appetite and waning momentum.

Here we see FTX coin overlaid on top of the Nasdaq. FTX peaked ahead of the Nasdaq, but since then, every correction has been synchronized, with each correction weaker than the last. 

Until implosion.

Asking why FTX imploded, is like asking why Bernie Madoff imploded.

"The man who had to clean up the mess at Enron says the situation at FTX is even worse, describing what he calls a “complete failure” of corporate control"

Which gets us to the end of year bonus meltdown. This is normally the time of year when Wall Street does everything possible to keep markets levitated into early January. For obvious reasons. There are only a few weeks left in the year which can make or break their annual bonus. Historically betting on a market crash at this time of the year is a very bad bet. The seasonal rally tendency is strong. 

Be that as it may, December rate hikes are ALSO extremely rare in history. Only five in the past fifty years. Two of those rate hikes came in the past seven years, and they were BOTH disasters. In 2015, the global markets had been monkey hammered by the August China devaluation. So when Yellen raised rates .25% in December, the market crashed at the start of January. In 2018, global markets had been monkey hammered by Fed rate hikes, QT, and Trump's trade war with China. The rest of the world was much weaker than the U.S. UNTIL October when U.S. markets imploded as well. The U.S. market bounced weakly in November and then imploded in December. When Powell delivered a rate hike in December the wheels came off the bus. 

So it is that we find the Nasdaq has the same coiled spring pattern that failed late in 2021. Back then, Thanksgiving was the beginning of the pattern, whereas this year Thanksgiving appears to be the end of the pattern. 

Bank of America asserts that this rally is now running on glue fumes. To paraphrase this article, global stock inflows are the highest in eight months, marking a likely end to this latest bear market bounce:

 

As we see also, the oscillator is back in overbought territory and rolling over deja vu of prior rallies this year:

On the other end of the spectrum is the reflation trade, featuring financials, industrials, transports and other economic cyclicals. Financials do not like inverted yield curves, because it makes it impossible for banks to make money since they borrow short and lend long. Which doesn't make money when short-term rates are higher than long-term rates. 

Here we see another clear example of Elliot Wave correction, which happens to be distinctly reminiscent of the pandemic. 

 

In summary, risks have increased massively year over year. 

However, complacency has attended this entire decline, now featuring eight month high stock inflows. Here we see VIX 2nd derivative volatility at pre-pandemic lows. What's coming is an FTX style meltdown that will include ALL global risk assets imploding at the same time.

The Nasdaq now has the exact same wave pattern as an Enron-eclipsing Crypto Ponzi scheme. The bull thesis is that the exact same wave pattern that imploded FTX, is precursor to a new bull stock market. 

Anyone who believes that, deserves their fate. 

 

THE LIGHT AT THE END OF THE TUNNEL

Wall Street has weaponized denial against the stoned masses, and they wouldn't have it any other way. Everyone gets to invent their own ending.

For now...

Once again, the end of year lull is a con man's paradise. Ahead of the New Year reality check, Wall Street is free to futurecast whatever science fiction they want, unquestioned by CNBC, which is now competing with Disney+ for viewers. 

It's that time of the year when Wall Street issues their annual forecast for the coming year. Unfortunately, it's also that point in the cycle, when Wall Street's annually extrapolated forward earnings estimates have the veracity of a Magic 8 Ball. No surprise, Wall Street consensus calls for an INCREASE in profits during the coming year of roughly 5%. Yes, you read that right. Ed Yardeni is hitting the crack pipe even harder this year with a +9% forecast.

Here's what Wall Street consensus estimates "forgot" to include:

1) Fed over-tightening

2) Housing collapse

3) De-leveraging

4) Recession

In other words, there is no cycle risk embedded in these predictions. 

As a proposed antidote to this level of impending criminality, Zerohedge this week posited what they believe to be "The Most Bearish" prediction for 2023. I leave to the reader the pleasure of parsing Wall Street bull shit inter-laced with Zerohedge bull shit to obtain your own conclusion. Suffice to say, the "most bearish" prediction also omits all of the risks I mentioned above.  At worst it predicts 15% additional downside for stocks from this year's low and 11% downside for earnings from this year's earnings. 

Here is how that looks graphically for stocks:

What it all comes down to is that Wall Street predictions are ALWAYS linear extrapolated from one year to the next. They use spreadsheet models with assumption parameters and then they plug in whatever numbers they want, in order to reach their conclusion. What passes for serious investing based upon "fundamentals" are blind guesses at the unknown future. Because what else could they be, Nostradamus? And for most of the cycle those guesses are in the ballpark simply because during economic expansion, growth is linear.

Until we reach the end of the cycle. 

Below is what Wall Street's "worst case" scenario for earnings looks like from an historical point of view. It's barely even visible relative to the big jump in earnings post-pandemic. Meanwhile, a repeat of 2008 is not even slightly an option based upon current forecasts and positioning. And yet, we are contending with a CPI at 40 year high and the Fed is still tightening into a Tech wreck/housing collapse. During those two prior debacles, they were ALREADY easing at this point in decline. 

Which gets us to the topic of over-tightening. This week, Fed officials have been taking turns pounding markets lower after last week's "dovish" CPI print of 7.7%. Today it was James Bullard's turn to put the kibosh on the pivot/pause fantasy, going above and beyond the call of implosion:

"Bullard suggested that the rate may have to rise to a level between 5% and 7% in order to quash inflation, which is near a four-decade high"

Not even ONE dunce in the media has pointed out that debt levels have sky-rocketed over the past two years and interest rates have DOUBLED year over year, meanwhile, the Fed balance sheet hasn't changed year over year. Which means they are crushing the middle class to protect the Casino class.

It's history's biggest policy error without any question, taking place in broad daylight. 

Which gets us to recession risk which is currently obscured by the high CPI readings. In the 1970s recessions it took several months of recession BEFORE unemployment began to rise. That is typical inflationary labor hoarding behavior, when real wages are negative and the economy is running at maximum  end of cycle capacity. However, today's pundits always point to the strong jobs market as THE sign that the economy is doing well. This week's retail earnings are another widely ignored warning. 

As is the inversion of the yield curve, now at a 40 year high:

Same article from above, further down:

"On Wednesday, Esther George, president of the Kansas City Fed, said in an interview with the Wall Street Journal that a recession was likely given how rapidly the Fed has tightened credit.

“I have not in my 40 years with the Fed seen a time of this kind of tightening that you didn’t get some painful outcomes” she said.

In summary, who do you believe?