Category: economic bubble

Coronavirus Fallout- Seriously, What Are We Doing?

distancing
So much for “social distancing”

It seems surreal to think that not even two months ago, we were treating the tragic death of Kobe Bryant as the defining moment of a generation. Indeed, the events around it were extraordinary, and in terms of public figures, his death alone was AT LEAST on par with that of Princess Diana and John Lennon. Factor in that his daughter and seven others were in the private helicopter with him, and it made the whole event even more painful to think about. Nevertheless, Kobe Bryant was still just one man, and outside of the few individuals close to him, his daughter, and the others lost in the accident, life would go on the same for all the rest of us.

But here we are, barely on the other side of an event that apparently changed American life more than anything since December 7th, 1941. (Yes, including 9-11.) The Coronavirus, something that entered our lexicon at the end of 2019, has fully taken over our society, days before the Spring of 2020 commences. Indeed, its spread has taken on a life of its own, like the deadly virus that is, but at least so far, in a very unexpected, ironic way. Rather than infecting our immune systems at the exponential rate that has been predicted, it has infected our society and way of life, in a way that we will likely not recover from any time soon. By trying to preemptively stop the virus from harming us in mass numbers, we have ended up harming ourselves. The whole thing kind of feels like the episode of South Park, where the parents banished the children from the town, in the hopes that they wouldn’t be kidnapped.

None of this is to make light of the Coronavirus itself. It has created chaos in the health industry across the rather motley crew of Iran, Italy, and especially China, where the virus started. It is far deadlier than the “common” flu, and more contagious than other diseases that have made their way to the headlines in the early 21st century, such as Ebola, SARS, and H1N1. But in a highly interconnected world of 7+ billion people, these types of disease are, unfortunately, inevitable. While the worse case scenario projections are terrifying, the reality so far is nowhere near a fraction of that. Nothing in our lifetimes- at least for those of us under 80 years old- has ever altered the course of our collective lives so dramatically as this. We still do not know if these draconian actions are justified, as only time will tell. But what we DO know is that there is no turning back.

But what exactly caused this event to “succeed”, in a way that The Cold War, Radical Islamic Jihad, the aforementioned diseases (H1N1 killed over 10,000 Americans), climate change, and various other scares did not? Part of it is the spread of social media, which in some ways, behaves in a virus-like way itself. As news permeates through the internet, stories that have “sizzle” manage to grow exponentially. We watched through the news what was happening in China, and knew that it was only a matter of time before SOME variation hit home. Then in early March, Rudy Gobert, a star player in the NBA who had mocked the Coronavirus with a crude “prank” just days earlier, was diagnosed with the disease. Within two days, professional sports leagues were shut down, creating shock not experienced in generations throughout society. Sure, this happened for a very brief time during 9-11, but that was because the country was in mourning. This time around, sports leagues, along with all the industries that followed, were shut down as a preventative measure for a microscopic menace, fearing that those in crowded spaces could catch the virus very easily. It also didn’t help matters when Tom Hanks, a larger-than-life figure in a similar vein to Kobe Bryant, turned out to be mortal as well. People don’t like to say it out loud, but when bad things happen to these “invincible” celebrities, we wonder what kind of chance the rest of us have.

So now, we have toilet paper shortages- another irony, seeing how Coronavirus is not THAT kind of disease- as well as soap, hand sanitizer, and other products that are running low on the shelves. But all that is merely a warmup act for the TRUE damage we are just beginning to experience- the shutting down of the global economy, “led” by the American consumer. For a small, vocal minority that included yours truly, this has been in the pipeline for decades, as financial institutions and their willing-if-unknowing accomplices have been kicking the can down the curb, hoping to put off the inevitable juuuuuuuust a little longer. It was always heading for disaster- glimpses of that could be seen after the DotCom bust, followed by the one in real estate a half decade later. What’s so surprising is that it is not an external event that likely took the whole thing down, but that it was dismantled willingly by a society fearful of what MIGHT be. And make no mistake- even if the shutting down of commerce “only” lasts for two weeks, as unlikely as that seems, it will cause catastrophic waves that will be felt for years to come. The global economy was set up with an appetite similar to the hummingbird- it needs to be fed constantly, or it will die. Whatever unprecedented measures await us to keep it afloat, on top of the unprecedented measures that DID keep it afloat up until this point, they will have unintended consequences that will likely change the way business is done forever.

And what of this soon-to-be defunct economy, that is all most of us have ever known? If we’re looking for silver linings- and if we ever needed silver linings it would be now- one might be that the power will be shifted away from industries that have done more long term harm than good. Around the same time that the current President made his infamous comment about Mexican immigrants in 2016, Michael Bloomberg, the wealthy tycoon and former New York City mayor who ran a disastrous Presidential campaign, said something arguably as offensive and ignorant. Trying to make a point about the superiority of the Information Age businessman over the seemingly-archaic blue collar farmer, Bloomberg implied that those who succeeded in the Information Age (eg. people like him) did so because of superior intellect, whereas “anybody” could learn how to farm. Bloomberg, who apparently thinks his food is grown in a Sparrow’s pizza chain restaurant, completely disregarded the critical importance of the farmers that allow us Americans to take for granted just how easy it is to fill our bellies whenever we feel like it. As the financial system that helped Bloomberg become one of the world’s wealthiest men crumbles in real time, while our digestive systems still demand three meals a day, it will be interesting to see whose skills are really necessary to keep the world going.

Finally, a cold, perhaps even cruel question that needs to be asked- how many deaths will justify the dismantling our way of life? Until the last few weeks, we were told that the largest threat to our society was climate change, although very few practical changes were made, even by those who claimed to be most concerned. If the Coronavirus has taught us anything, even in its early stages, it’s that our fragile society can be hit by any threat at any time, without any time to prepare. Now that we have been caught flat-footed, our leaders are trying to make up for it by overcompensating. When we look back at the actions that are being taken as this blog post is being written, will we be able to say it was worth it? More than half a generation ago, George W Bush got lukewarm support for the invasion of Iraq, on the grounds that Saddam Hussein was harboring weapons of mass destruction. A few empty canisters later, the whole thing appeared to be a catastrophic miscalculation at best, a deadly set of lies at worse. This is obviously a different threat, in that we KNOW it’s real. But justifying our countermeasures will be a Catch-22. If the number is too low- let’s say, below the number of people killed by H1N1- the whole thing will be seen as a supersized, overly sensationalized media news cycle. If the number is too large- let’s say, approaching or, heaven forbid, EXCEEDING the Spanish flu of 1918, the last TRUE American plague- we’ll say that the social distancing movement was a giant failure. So, the number probably be somewhere well above H1N1, but well below the Spanish flu, to even TRY to justify the current actions being taken.

If I may emphasize the point, I know how heartless this sounds, and it’s not to minimize the tragedy that we have already seen, nor the tragedy that still lies ahead of us. But sometimes, overreaction can be as bad or WORSE than doing nothing at all. (Keep in mind Saddam Hussein was, after all, a mass murdering tyrant.) For those who think that these actions are justified, even if they only end up saving a relatively small number of lives, consider this- is bringing the national speed limit down to 25 miles per hour worth the tens of thousands of lives that would be saved on the road? Remember- throughout most of civilization, the only time anyone traveled more than 25 miles per hour was when they lost control of their chariot.

Anyway, best of health to anyone reading this. Let’s hope that when it’s time to look back to see how well this blog post held up, we’re all around to do so.

David Collum Makes A Strong Case For His Point Of View, While CNBC Barely Even Tries

David Collum Makes A Strong Case For His Point Of View, While CNBC Barely Even Tries

In his extensive year in review blog, Dr. Collum puts in an enormous amount of thought, effort, articulation, and…best of all…charts-

On the other end of the spectrum, we have this gem from CNBC- “A reason for hope- back-to-back down years for the stock market are rare“.  The entire argument can be found inside the title.

This, by the way, is how I became a permabear (and goldbug) in the first place.  In the earliest part of my adult life, I bought stocks, just like everybody else.  But as I read more articles from ALL points of view, the bear side just made so much more sense.  More than an entire generation of papering over one financial crisis after another has, ironically, had the effect of giving people MORE confidence in our broken system- after all, if any problem can be “solved” by sweeping it under the rug, who’s to say we can’t continue down that path indefinitely?  (Interestingly enough, this reasoning does not fly with the public when it comes to environmentalism.  Well…at least, not when it comes to discussing environmentalism- implementation is another story altogether.)

The question is, can The Powers That Be paper over the next (and apparently, impending) financial crisis?  We’ll find out soon enough…
Palladium Rhapsody (lyrics only)

Palladium Rhapsody (lyrics only)

With the success of the movie Bohemian Rhapsody, and the coming apart of our financial bubble (this time, it SEEMS like the real deal, but we’ll see..), it feels like the perfect time for a song parody.  I admit to being inspired by- and also “borrowing” liberally from- the creative “Crypto Karaoke” account on YouTube.  Try this at a karaoke bar- for the 5% of the audience who get the joke, it will be worth it!  Enjoy…

Palladium Rhapsody
-Original Lyrics from Queen’s “Bohemian Rhapsody”
-Original Parody from Crypto Karaoke’s “Blockchainian Rhapsody

Is this the real life?
Or is it fantasy?
Caught in a stock slide,
No escape from a bankruptcy.

Open your eyes,
CNBC lies, you see…
I’m just a poor boy,
But that will change instantly, because
Bull markets come, bull markets go.
Buy gold high, buy gold low.
Anywhere its price goes,
doesn’t really matter to me…to me.

Hold on…stick with the plan.
Don’t let the FED inside your head,
Though precious medals might seem dead.
Hold on, the gold bull’s just begun.
If you sell now you will throw it all away.
Hold on, ooo-woo-ooo!
The dips will make cry,
But the price will come right back this time tomorrow.
Hold on, hold on,
Because the price now doesn’t matter.

Too late.
Nasdaq’s time is done.
For years tech stocks were all buys.
Now it’s time for them to die.

Goodbye fiat money.
I’ve got medals.
There’s no need for all the brokers who steal from you.
hold on, oo-woo-oo!  (“any way the market goes”)
The fiat system’s gonna die.
Gold’s dips are your chance to go buy some more.

(guitar solo)

“I see The Federal Reserve’s brilliant plan!”
“Where’s The Proof?
Where’s The Proof?
Are They Even A Real Bank Though?”

“Markets Are All Crashing,
Trolls Are Really Bashing Me!”
“Bartiromo! Bartiromo! Bartiromo!  Bartiromo Bartiromo let me go!  (Manifico-o-o-o….)”

“I’m Just A Poor Boy,
Don’t Have Any Gold To See…”
“He’s Just A Poor Boy,
Bought Stocks For His Family.
Now He Will Pay For This Monstrosity!”

“Easy Come, Easy Go
Will You Keep Rates Low?”
J. Powell
“No!  I will Not Keep Them Low!”
“Keep Them Low!”
J. Powell
“I will Not Keep Them Low!”
“Keep Them Low!”
J. Powell
“I Will Not Keep Them Low!”
“Keep Them Low!”
“Will Not Keep Them Low!”
“Keep Them Low!”
“Will Not Keep Them Low!”
“Keep Them Low-ow-ow!”
“No no no no no no no no!”

“Oh, my Maria
My Maria
My Maria Bartiro(mo)…

The bubble popped, now why won’t you start listening to me, to me, to meeee!”

(guitar kicks in)

“So you think you can mock me, just give it a try…
as you bought all your stocks near their all time highs!
Oh, baby, get out of your stocks, baby!
Just got to get out, just got to get out of stocks here!”

“The stock price doesn’t matter,
All of you will see
The stock price doesn’t matter…
the stock price doesn’t matter…to me.”

*outro*

(“Your money should go into gold.”)

Why write a long blog post, when a picture is worth a thousand words…

Why write a long blog post, when a picture is worth a thousand words…

…not to mention a few thousand points on the Dow??

(disclaimer- I didn’t create the image on the right, so whoever actually did is free to take the credit.  Everyone on the Internet already knows that I didn’t create the image on the left.)

With all the many topics that get debated these days- some of which are so trivial- it amazes me that one of the most important issues of our time goes untouched- Why do we allow one single person to control interest rates for the entire U.S. financial system?  (Woodrow Wilson could not be reached for comment, on account of being dead for 94 years.)

Anyway, what the so-called “permabears” have been warning about for years, even decades, seems to finally be at hand.  It’s still early, but that’s kind of the point- what happens when the wheels REALLY fall off this time?  The Fed managed to put them back on twice already in this still-young century.  Can they do it again, or has luck run out (FINALLY) for those who have put faith in this financial system’s ability to bounce back, from one Fed-induced crisis after another?  As of now, current Fed chairman Jerome Powell doesn’t even seem interested in saving the system, but he likely doesn’t realize what danger it’s in, or just how fragile his predecessors- specifically Alan Greenspan, Ben Bernanke, and Janet Yellen- have set it up for him.

Stay tuned….

Humbled but undeterred- a reminder of the exceptionally dangerous current financial environment

Humbled but undeterred- a reminder of the exceptionally dangerous current financial environment

Since 2009, I’ve been so very, very wrong about how the markets would play out.  (I was wrong for about 6 years before THAT, until I wasn’t.  But being right didn’t last.  Anyways…)  But in the same way that we need to worry about climate change, even though many near and even intermediate term forecasts have been so off- and make no mistake, they have been- the core reasons why I jumped up and down about the markets all those years has only gotten worse, and that’s not even counting what’s going on with our current President.  Maybe it will, somehow, someway, keep going up for a while longer.  I honestly don’t know, and I came to terms with that a few years back.  But my beliefs that trouble is ahead at SOME point have never been stronger.
You don’t have to take my word for it, though, because I’m not alone.  There are still TWO of us roaming the earth!  Doug Noland is a guy I used to read regularly, back at the turn of the century.  He’s one of the few so-called “permabears” remaining.  He is an even rarer breed among those who can acknowledge that things haven’t played out the way that was expected, and yet still hold onto his beliefs.  I hadn’t read him in years, but I checked out his webpage, just to see what he had to say.  His posts are REALLY long, so I cut and pasted the most relevant part.  If you want to read the whole thing, the link is included below.

Happy trading, and check your 401K before they wreck your 401K.  Be careful out there….

“When I began posting the CBB almost twenty years ago, my focus was on “money,” Credit and the U.S. boom. I didn’t anticipate geopolitical developments would some day play a role in my analysis. But I also never contemplated a global Bubble of today’s dimensions and characteristics.

I never imagined how an explosion of government debt and central bank Credit would be used so recklessly to inflate intertwined Bubbles spanning the globe. Never did I contemplate how this new age global “system” (already highly unstable two decades ago) would be nurtured, backstopped and resuscitated into today’s monstrosity. I never could have envisioned how the U.S. would run huge Current Account Deficits for another 20 years and still maintain such command over a dollar-based global financial apparatus. Who would have believed a global financial arms race was even possible – especially amidst such escalating animosity and hostility?

This is a strange period. It’s strange here at home – in society, in politics and in the markets. It is strange globally. The unprecedented nature of what we see at home, abroad and in the markets provides a lot of leeway with interpretation and analysis. Somehow, there’s a dominant contingent that believes the U.S. is on the right course – that the economic boom will accelerate, markets will, as they always do, continue to rise. The future is bright, all the polarization and social angst notwithstanding. Markets offer unassailable confirmation.

It would be great if the optimists were right. But this was a week that corroborated a much darker interpretation of developments. A decade of unrelenting easy “money” and booming finance has masked a metastasis of festering issues – financial, economic, social and geopolitical. And we’re now only a more general bursting of the global financial Bubble away from having to simultaneously face a bevy of very serious issues. As they tend to do, developments can seem to move at glacial pace – and then, rather suddenly, they can be more akin to lava.

As I have posited repeatedly and expounded in more detail last week, the global Bubble has been pierced at the “periphery.” I also believe the backdrop is now conducive to contagion at the “periphery” (finally) gravitating toward the “core.” The Turkey-induced risk aversion that erupted this week in European equities (bank shares!) is an important escalation in “Periphery to Core Crisis Dynamics.” “Risk off” is gaining a firm foothold, and global financial conditions now tighten by the week. Market pundits expect cooler heads in Ankara and Washington to prevail over the weekend. If not, it could intensify what was already a particularly long and hot summer. ”