The Twitter story has been extensively covered so SLL has ignored it. However, this is a unique and first-rate analysis of Twitter, Big Tech, and the implications of Elon Musk’s abandoned bid for the company. From Tyler Durden at zerohedge.com:
After months of drama, it would appear the fate of social media giant Twitter has been decided, and the result is an inevitable path to the internet graveyard.
Many people will question the notion that Twitter could ever actually bite the dust, but they are probably unfamiliar with the company’s dismal performance as of late. The reality is, Elon Musk’s potential buyout was their last chance to stay afloat; now that Musk has exited the deal, they face a continued and steady decline into irrelevance like many other Big Tech companies before them.
While it’s possible that Musk’s decision is merely a play for a reduced sale price, it’s probably safe to assume there is not going to be a purchase anytime soon. This sets a chain of events in motion that bode very poor for Twitter given their track record the past couple of years, but first let’s consider the current situation.
While the initial argument from Twitter execs will be that Musk “waived” his rights to change the original deal and thus he is required to buy regardless, his waiver does not extend to his rights to review Twitter’s claims about their user base. The deal itself was predicated on Twitter giving honest assessments of the percentage of users that are actually bots (fake accounts). Twitter initially claimed that bots only made up around 5% of users; it would appear that Musk has discovered this to be false, and this is the position his lawyers have asserted through the SEC.
When corporations come calling with high-minded concerns, run. From Dr. Joseph Mercola at lewrockwell.com:
Pouncing on investors’ interest in environmentally friendly, sustainable investing, the S&P 500 ESG Index was launched in 2019.1 ESG, or environmental, social and governance, funds are supposed to be those focused on companies with strong environmental ethics and responsibility, but further investigation reveals rampant greenwashing has occurred, and many ESG-labeled funds are far from “sustainable.”
The Securities and Exchange Commission (SEC) has been scrutinizing ESG funds for years, as their popularity soared. While funds focused on socially responsible investing were valued at $2.83 billion in 2015, this grew to $17.67 billion by 2019, when Alex Bernhardt, U.S. head of responsible investments at investment consultant Mercer, told The Wall Street Journal, “In every asset class, in every region, ESG product development is the thing right now.”2
Fast-forward to 2022, and the SEC is cracking down on ESG labels, with multiple investigations launched into ESG greenwashing on Wall Street by multiple mega-banks. Globally, $41 trillion are expected to flow into ESG funds in 2022.3
Follow the money, where it does and doesn’t go. From MN Gordon at economicprism.com:
“It’s like going to the ATM in Vegas and then going to the roulette wheel and it comes up red and you go back to the ATM.”
The remark was recently made by Steve Mermell. The man retired last year as city manager of Pasadena, California. He knows a thing or two about how borrowing to enhance pension fund returns can result in spectacular losses.
The Wall Street Journal article did not clarify whether red was a winning turn of the roulette wheel or not. Within the article’s context it didn’t really matter.
The main point was that public pension funds are grossly underfunded. Consequently, more and more pension funds are borrowing money to play the markets. The goal is to boost returns to cover their massive funding gaps.
If you recall, public-sector retirement plans offer defined benefits, where retiree pension checks are calculated based on salaries and years of service. Private employers, on the other hand, generally offer defined-contribution plans (like 401Ks), where payouts are based on market returns.
If you live long enough, and are a recipient of a public pension fund you will get out far more than you put in. If you work in the private sector, there’s a good chance you will outlive your retirement savings.
From The Babylon Bee:
WASHINGTON, D.C.—In a statement given this week, House Speaker Nancy Pelosi said she feels for Americans struggling with prices at the pump and offered a suggestion for how to cope by becoming a millionaire through insider trading.
“If you want to avoid suffering from high gas prices, the solution is simple,” she said. “Just get elected to Congress and spend decades trading stocks based on insider information only Congress is allowed to have! Easy!”
“You’ll even have money left over for ice cream and to bail your spouse out of prison if they get a DUI!”
Republicans condemned Pelosi’s callous statements, contesting that Americans should instead pull themselves up by their bootstraps and work harder, and maybe meet with a few ExxonMobil lobbyists for some extra cash.
“Pelosi’s advice is sound, but we’ve found this approach only works for one out of every 350 million Americans,” said local Democratic strategist Yance Parmesan. “For everyone unable to enrich themselves as a career politician, we recommend you just ask Biden for a gas card or buy an electric car. Simple as that!”
At publishing time, gas prices rose even higher, forcing Pelosi to get a second job delivering pizzas.
A quick preview of what happens next: nothing good. From Doug Casey at internationalman.com:
International Man: In addition to stocks, it seems that almost every asset class is also crashing.
What’s your take on the markets, and where do you think it’s headed?
Doug Casey: Let’s take them in order of size and importance.
The biggest market is bonds. It’s especially dangerous because it’s the most overpriced. Bonds are a triple threat to your capital. First, because of the inflation risk, which is huge and growing. Second, is the interest rate risk; I expect rates to double, triple, or quadruple from here, going back to or above the levels of the early 80s. The third is the default risk, which applies to everything except US Government debt. AAA corporate debt hardly exists anymore.
Interest rates have skyrocketed in the last year, with mortgage rates going from under 3% to over 6%. 30-year treasury bonds still only yield 3.25%. But with inflation running 10, 12, or 15% and going higher, long-term Treasuries have a lot further to fall. I remain short T-bonds.
Everybody’s paying attention to the stock market because they’re fully invested. The meme stocks, SPACs, and tech stocks have all collapsed. The big ones are down 25%, and many are down 80 or 90%. It’s not over yet. People still feel that they can buy the dips. They’re hurting, but they’ve been paper-trained over a couple of generations to believe the Fed will kiss everything and make it better.
Posted in Banking, Business, Collapse, Currencies, Debt, Economics, Economy, Financial markets, Governments, Investing
Tagged Gold mining stocks, interest rates
Interest rates are going up, and given the long swings in the bond market, they’ll probably be going up for many years. From Nick Giambruno at internationalman.com:
Although many don’t realize it, interest rates are simply the price of money.
And they are the most important prices in all of capitalism.
They have an enormous impact on banks, the real estate market, and the auto industry. It’s hard to think of a business that interest rates don’t affect in some meaningful way.
Today, we are on the cusp of a rare paradigm shift in interest rates. Such changes take decades—or even generations—to occur. But when they do, the financial implications are profound.
Interest rates rise and fall through decades-long cycles, as seen in the chart below.
That makes sense, as debt is naturally cyclical. It allows people to consume more than they produce now. But it also forces them to produce more than they consume later to pay it off.
Interest rates last peaked in 1981 at over 15%. Then, they fell for 39 years and bottomed in July 2020 at around 0.62%.
The red line marks the long-term average of 5.6%.
Every great wave of innovation has a lot of failures and a few great companies that capitalize on the innovation. Don’t let the recent weakness in cryptocurrencies prompt you to throw out the investment baby with the bathwater. Odds are that some cryptos will emerge from the carnage and over the long term will be stellar investments. From Simon Black at sovereignman.com:
A collapse of financial asset prices and the value of currencies against real goods is the inevitable outcome of fiat debt creation without restraint by central banks. Be prepared. From Dr. Joseph Mercola at theburningplatform.com:
- Financial experts and insiders have, for well over a decade, warned that a collapse of the U.S. currency is a mathematical inevitability, and this collapse will have global ramifications, as the dollar is the world’s reserve currency
- U.S. inflation is currently at 8.6%, but in some markets, it’s in the double digits. Used car sales, for example, have seen an inflation rate of 22.7% in the past 12 months. Globally, food prices increased by 29.8% between April 2021 and April 2022
- In 2011, George Soros stated that economic collapse is “foreseen” and that authorities were simply buying time before the inevitable collapse. Now that we’re in the economy’s final death throes, those who have been aware of the trajectory for well over a decade cannot admit it, because then they’d have to explain why they didn’t act to stop it. Admission would also expose the central bank system as the fraud that it is
This bear market won’t be over until “buy the dip” is regarded as a bad joke among bedraggled stock speculators. From Wolf Richter at wolfstreet.com:
Still way too much wild craziness, including the ultimate bag-holder gamble: Why the bottom isn’t anywhere near.
I went out looking for blood in the streets Friday evening after the sell-off to see if markets had hit bottom, but there wasn’t any blood. There was instead chatter about the next rally, about what to buy and when. And there was the relentlessly exuberant pump-and-dump meme-stock crowd hoopla-ing DVD rental company Redbox Entertainment, one of the infamous SPACs, and video-streaming service Chicken Soup for the Soul Entertainment, which is going to acquire Redbox, in an utterly ridiculous crazy-wild game with a deadline (we’ll get there in a moment).
That this game is even played – that this utter nuttiness in the markets continues – indicates that there is still way too much exuberance, way too much liquidity, way too much craziness. And the bottom isn’t in until this kind of craziness is snuffed out.
The two biggest interrelated economic stories are debt and the debasement of fiat currencies. From Alasdair Macleod at goldmoney.com:
Initiated by monetarists, the debate between an outlook for inflation versus recession intensifies. We appear to be moving on from the stagflation story into outright fears of the consequences of monetary tightening and of interest rate overkill.
In common with statisticians in other jurisdictions, Britain’s Office for Budget Responsibility is still effectively saying that inflation of prices is transient, though the prospect of a return towards the 2% target has been deferred until 2024. Chancellor Sunak blithely accepts these figures to justify a one-off hit on oil producers, when, surely, with his financial expertise he must know the situation is likely to be very different from the OBR’s forecasts.
This article clarifies why an entirely different outcome is virtually certain. To explain why, the reasonings of monetarists and neo-Keynesians are discussed and the errors in their understanding of the causes of inflation is exposed.
Finally, we can see in plainer sight the evolving risk leading towards a systemic fiat currency crisis encompassing banks, central banks, and fiat currencies themselves. It involves understanding that inflation is not rising prices but a diminishing purchasing power for currency and bank deposits, and that the changes in the quantity of currency and credit discussed by monetarists are not the most important issue.
Posted in Banking, Business, Collapse, Currencies, Debt, Economics, Economy, Financial markets, Governments, History, Investing
Tagged Keynesian economics, Monetarism, Monetary debasement, Monetary inflation