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Photo Credit: Glenn Cantor
• Stock market crash, right on schedule. Time to Short?
• Is the Yellen Fed doing a Roy Young?
• China's Great Wall of Money crumbles. Who will be America's IMF this time?
• Why do they call them Emerging Markets? Because it's hard to get your money out in an Emergency.
• Gold says, "I'm not dead yet!"
What? You thought it could go on forever? The asset bubbles and re-bubbles and re-re-bubbles?
How many times can your reflate a torn up rubber raft?
Time to chuck it out and get a new one.
Except that there isn't a new one. This is it. The only one we got and we're all in it together.
And, gosh, looking back on it, over the past 20 years, maybe we shouldn't have taken it through Class V rapids twice loaded with beer kegs.
But here we are, cheek to cowl, in this giant, flaccid, half inflated economy, damage from the last two runs shoddily patched, headed over the rapids again. Without so much as a roll of duct tape.
While the usual bearish crowd was busy capitulating over the past six months and calling for continued growth and a good year for the markets in 2014, maybe not as booming great as 2013, I've been following the data and it takes me to a different place, to an epic and virtually unstoppable calamity.
Not that I didn't try to build an optimistic case to counter my June 2013 forecast The Post-Market Economy – Part II: The Crash of 2014, it's just that the data kept dragging me off that run.
The ineludible obstacle in the path of any hopeful line of argument is the fact that the current recovery from the 2008 credit crisis that followed from the condition of over-indebtedness and risk-polluted credit markets has since 2009 been achieved by means of credit inflation which has produced even greater over-indebtedness.
Credit risk pollution, rather than pooled in an obscure corner of the credit markets and seeping into the global financial system by way of pension funds, this time around has been injected into the foundation of the endogenous credit structure by means of the Fed's "yield curve shaping," a polite term used by academics in place of the rude but more truthful term "long-bond price fixing."
I don't blame anyone for wanting to turn and look the other way. God knows we've been through enough, especially those citizens of the world who have not benefited from the regressive reflation policies of central banks. These have primarily benefitted the asset holding classes. A recent Gallup poll reveals 58% of Americans think the economy is getting worse, and I doubt they are in any mood to hear bad news about the future. Economic doomertainment is out of fashion, and that fact alone tells you that popular sentiment is still dower. In hard times, American Idol-type hopertainment makes a comeback.
It's not all bad news. Fortress America economic and policies are working their magic on the trade deficit, and are creating a beneficent spread between U.S. and world oil prices that is providing a big assist to the recovery. But to spy objects of economic beauty you have to crane your neck to see over the ugly fact that as recently as the year 2000 only $2.4 of new debt creation was needed to produce $1 of GDP growth and today that ratio is $4.6 to $1. Credit-financed growth is fun while it lasts, but historically has proved most miserable in reverse gear.
If you have a strong stomach and a firm grip, grab your helmet and jump in for a guided tour of the Last Bubble. But don't close your eyes. You can't read that way.
CI: Let's get right to it: the stock market. What happened in 2013 and what's in store for 2014? You noted the tops of the last two bubbles precisely, the first in March 2000 and the second November 2007. May 2011 you said the stock market was set to top-out at the end of 2013 then crash. Is it "Time to short" again? (read more and discuss here...)