Thursday, April 29, 2021
The New Utopia
Wednesday, April 28, 2021
EPIC HUBRIS At the Pinnacle Of Fraud
We are seeing a level of central bank adulation that is beyond the asinine. An entire society convinced that printed money is the secret to effortless wealth. Those who believe this contrivance will find their future is forever stained by the epic fraud that defines this era...
We talk about the financial consequences of this rolling pump and dump scheme all the time. Buy this bubble or that bubble and get out ahead of everyone else or explode in place. Those are the choices.
However, the other major consequence of this era will be measured in lost credibility, damaged reputations, and destroyed careers. Don't worry about Wall Street, I doubt there will be one after this event - their primary line of business pumping junk IPOs/SPACs/subprime mortgages into public markets will be regulated out of existence. This era will separate those who bought and believed the largest fraud in human history versus those who wanted nothing to do with it. Sadly we see that the pressure to capitulate to mandatory optimism is overwhelming. No amount of intellect can prevent those in the financial services industry from succumbing to the primary economic imperative which happens to be blind optimism for the future. Why? Because 90% of the time, optimism is richly rewarded. However, 10% of the time it proves to be lethally fatal. Sadly we are in the sudden death overtime phase of the richly rewarding era. The muscle memory of the past is now guiding the extrapolation of delusion into the indefinite future.
Somehow today's con artists have convinced the public that a massively leveraged post-pandemic re-opening is the strongest recovery in history. Meaning, the exact same businesses that were forced to shut down last year, will now partially re-open and economists will hail that as a record recovery. All because they base ALL of their economic metrics (metricks?) off of year over year comparisons. Last year being dire depression, this year being greatest economy in history. No other profession could get away with this level of incompetence.
According to the Fed's own economic model, these are the leading indicators based upon one year rate of change relative to a locked down pandemic:
Here we see, the "greatest recovery in history" attends U.S. payrolls at a level first seen five years ago:
The recent passing of Bernie Madoff at the pinnacle of the largest global Ponzi scheme in human history will this weekend be matched by the spectacle of "The greatest investor of all time" holding court at his annual confab.
It's called tempting fate.
With a straight face Buffett will regale his acolytes with tall tales of his legendary success. There is only one problem, it will be all bullshit. Since 2008, Buffett and his billionaire cohort have been bailed out by non-stop monetary intervention. So much so that monetary policy is no longer having ANY effect on the economy. Its sole use is to prop up the wealth of multi-billionaires at public expense. Monetary policy is now the method by which wealth passes from the middle class into the hands of the ultra-wealthy on its way to offshore bank accounts.
From an economic standpoint, the situation we face was last faced in the 1930s - a liquidity trap. A scenario in which interest rates reach a point at which there is no one left to borrow. Looking back, historians will say that the pandemic lockdown concealed a liquidity trap that was deemed to be temporary, but turned out to be a permanent scarring of consumer confidence.
"A liquidity trap is a contradictory economic situation in which interest rates are very low and savings rates are high, rendering monetary policy ineffective"
Here we see that consumer sentiment has in no way recovered back to its pre-pandemic levels, notwithstanding the biggest asset bubble in human history.
As it stands now, central bank alchemy still "works" to the extent that it inflates asset bubbles. However, in the experience of Japan (and China), when these bubbles deflate, even that "super power" will be rendered useless.
And then, the underwear will be mighty stained.
Sorry Warren. Been there, done that.
Tuesday, April 27, 2021
America's Japanified Supernova
The Calm Before The 100 Year Storm
"The median short interest in members of the S&P 500 sits at just 1.6% of market value, near a 17-year low"
Monday, April 26, 2021
Lethal Asset Hyperinflation
The sheeple at large have lethally conflated an asset hyperinflation bubble for a traditional wage price spiral. They've had ample assistance from those who are more than happy to offload over-valued assets at asinine prices...
This current paradigm is nothing like true inflation as defined by a cost of living wage price spiral. In order to have a wage price spiral, one must have wages increasing at an accelerating rate. Not depressed by mass unemployment. In addition, under true inflation financial assets - stocks and bonds - get destroyed by the reduced discounted value of future payments. Does that sound like this type of inflation? Of course not. This is a lethal asset hyperinflation bubble rotating from one asset class to the next. And the dominoes are falling.
Most articles on Zerohedge are worthless these days, because not unlike the mainstream media, the quality of their content has declined inversely with the growth of their lowest common denominator subscriber base. Nevertheless, this one by The Burning Platform cut through some of the monetary haze surrounding this lethal hyperinflation bubble. The author describes how a condo that languished below 2004 prices for 14 years, suddenly gained 60% in the past two years. Then he talks about the baseball card craze and how small pieces of cardboard are suddenly gaining tens of thousands in "value". Does anyone actually believe there is a shortage of basecall cards? Apparently, the site that values these sports collectibles stopped taking new customers because they've been inundated with new clients eager to value (aka. "sell") their old baseball cards.
Remember a year ago when there was a toilet paper shortage at the beginning of the lockdown period?
The article below is a reminder from March of last year. Several reasons for the shortage are given, but the one that resonates is that panic buying creates more panic buying. In other words, what they are describing is the hoarding mentality that accompanies a TRUE hyperinflationary environment - one in which prices are higher week after week. There is only one problem, the shortage was temporary. If there was true hyperinflation, the cost of toilet paper would be skyrocketing not due to a lack of supply but because the dollar would be collapsing in value.
"Images of empty shelves and shopping carts piled high with supplies have inundated news reports and social feeds. People see images of panic buyers, assume there's a reason to panic and buy up supplies, too"
Of course there was no actual shortage of toilet paper. Manufacturers quickly figured out how to make more of it. In fact, last year's shortage has turned into this year's glut:
One year later:
"Kimberly-Clark Corp. reported a sharp drop in toilet paper sales and warned the coronavirus pandemic-fueled surge in demand for its products was slowing."
The number of assholes keeps growing at an exponential rate, and yet toilet paper demand is slowing. A modern paradox.
Where was I...
Unlike general price inflation, an asset hyperinflation bubble can implode overnight, destroying asset values. Central banks didn't have to do a thing for Gamestop to implode. Next went Biotechs, Ark ETFs, EV SPACs, Fintechs, Cloud computing etc. Central banks didn't raise interest rates nor change their QE policies in the least.
The toilet paper scenario is a warning of what's coming when this hyperinflation asset bubble fully unwinds - a glut of everything.
Gold, which is the true protection from inflation, is warning that there is no sustainable inflation. Gold started rallying in 2019 when the Fed was cutting rates, but then it ran out of gas last summer. One of the first asset bubbles to roll over. In my opinion it has substantial downside from these levels.
All of these bubbles are predicated on the basis that the dollar is losing its value. Permanently. Which is the fundamental basis behind true hyperinflation.
However, the dollar is merely lurking behind the scenes of the massive margin expansion.
What people forget from last year, is that one of the first order effects of the pandemic crash was that the dollar ripped higher.
We are seeing a very similar headfake pattern play out this year:
When the dollar rips higher, today's assets will become liabilities. At that point, low interest rates won't matter. Only return of principal will matter. There will be a global liquidity crisis unlike anything we've seen in our lifetimes.
Those who are predicting the death of the dollar will get their heads ripped off. Again.