Tag Archives: Stock Market

The Counter-truths Unspin, by James Howard Kunstler

What if revulsion at Covid-19 totalitarianism plus the stolen election boil over at the same time the economy and financial markets head south in a big way? From James Howard Kunstler at kunstler.com:

Back in the day, LSD trips were mostly a matter of personal choice. Today, though, all you have to do is wake up somewhere between Montauk and the Farallon Islands and your senses are overwhelmed with hallucinations. The public used to depend on newspapers and TV networks to suss out reality, but that filter is long gone, replaced by a relentless “narrative” machine, and all it does is spin out one technicolor whopper after another.

The trouble is: narrative is not the truth. Generally, it’s the opposite of the truth. It’s manufactured counter-truth. The more narrative you spin, the faster you must spin off new supporting narrative to conceal the untruth of your previous narrative — until the national hive mind is lit up in unreality where nothing makes sense and the very language that separates humanity from the rough beasts becomes a social poison. And is “Joe Biden” not the perfect gibbering epitome of this mess, a ghost in the narrative machine, beckoning us into chaos?

America is on a bad trip. The country has lost its way psychologically. Two things will be required to bring it out of the fugue state it tripped into five years ago: some significant shocks to the system and the passage of time. Those shocks are in the offing and the “Joe Biden” regime — meaning Barack Obama and his wing-people who run things — are looking more and more desperate as auguries manifest.

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Do You Hear the Bells Ringing? by MN Gordon

The story of Ivar Kreuger was the point of departure for an Ayn Rand play (The Night of January 16th) and it holds lessons for today. From MN Gordon at economicprism.com:

There’s an old Wall Street adage, you’ve likely heard it, “No one rings a bell at the top (or bottom) of the market.”

The bell, of course, is the signal to sell at the market top.  Here we pause to take exception with this adage.  As far as we can tell, bells do ring at market tops.  Yet few hear them.  Most people’s ears are plugged with the prospects of easy riches.

Bull markets often give way to manias…where an asset’s intrinsic value becomes less important than the hope that an overpriced asset can be later offloaded at a higher price to a greater fool.  Certainly, irrational pricing based on greater fool dynamics is the sound of a ringing bell.  Though this can go on for years.

The current ratio of total market capitalization to GDP (now over 200 percent) is most definitely the sound of a ringing bell.  Another ringing bell is the $500 million batch in junk bonds recently sold by MicroStrategy for the sole purpose of buying bitcoin.  These bitcoin junk bonds pay a generous 6.125 percent coupon rate.

How will MicroStrategy pay the coupon if bitcoin goes down?  Will they sell more junk bonds?  Will anyone buy them?

Do you hear any bells ringing?

At the moment (at the market top), few people do.  These bells won’t be heard until after the market craters.  In retrospect, it becomes obvious that, at the market top, bells had been ringing practically every day.

The sound of a bell ringing at the market bottom is much more grim.  At real market bottoms, people kill themselves.  That’s when the great frauds are revealed.  And some former titans of industry are revealed to be great swindlers.

Today we look back nearly 100 years to one of the great Wall Street swindlers.  We squint for parallels to the present.  There is instruction to be found…and frauds to avoid…

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One Mad Market & Six Cold Reality-Checks, by Matthew Piepenburg

There are some commonly held notions out there that in no way comport with reality. From Matthew Piepenburg at goldswitzerland.com:

Fact checking politicos, headlines and central bankers is one thing. Putting their “facts” into context is another.

Toward that end, it’s critical to place so-called “economic growth,” Treasury market growth, stock market growth, GDP growth and, of course, gold price growth into clearer perspective despite an insane global backdrop that is anything but clearly reported.

Context 1: The Rising Growth Headline

Recently, Biden’s economic advisor, Jared Bernstein, calmed the masses with yet another headline-making boast that the U.S. is “growing considerably faster” than their trading partners.

Fair enough.

But given that the U.S. is running the largest deficits on historical record…

…such “growth” is not surprising.

In other words, bragging about growth on the back of extreme deficit spending is like a spoiled kid bragging about a new Porsche secretly purchased with his father’s credit card: It only looks good until the bill arrives and the car vanishes.

In a financial world gone mad, it’s critical to look under the hood of what passes for growth in particular or basic principles of price discovery, debt levels or supply and demand in general.

In short: “Growth” driven by extreme debt is not growth at all–it’s just the headline surface shine on a sports car one can’t afford.

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Reefer Madness and More, by David Stockman

Some marijuana has hallucinogenic properties, and that’s what they’re smoking on Wall Street and the Federal Reserve these days. From David Stockman at davidstockmanscontracorner.com via lewrockwell.com:

We sometimes wonder what they are smoking down on Wall Street, but today the question might better apply to the homegamers who are apparently hitting their bongs down in mom’s basement.

We are referring to Wednesday’s rip-snorting 47% rise in the stock of Tilray – the lead rabbit in the Reddit run on pot stocks.

As it happened, the day that GameStop peaked on January 27th, the once left for dead Tilray was valued at $2.9 billion. Thereafter it went vertical, weighing-in at $10.6 billion upon Wednesday’s close.

That’s not bad, of course, for a company with a mere $201 million of LTM sales, a net loss of $487 million and negative free cash flow of $261 million. And it’s not getting any better, either.

Since going public in 2018, the company’s net loss (blue line) has grown by 60X and its free cash flow (orange line) hemorrhage has worsened by 15X.

Indeed, when you look at Tilray’s three-year history as a publicly traded company, the massive swings in the market cap of this money loosing marvel are about as close to pure reefer madness as you can get without inhaling.

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Is This The Biggest Financial Bubble Ever? Hell Yes It Is, by John Rubino

It’s hard to argue with John Rubino; this is undoubtedly the biggest financial bubble ever. From Rubino at dollarcollapse.com:

If you’re over 40 you’ve lived through at least three epic financial bubbles: junk bonds in the 1980s, tech stocks in the 1990s, and housing in the 2000s. Each was spectacular in its own way, and each threatened to take down the whole financial system when it burst.

But they pale next to what’s happening today. Where those past bubbles were sector-specific, which is to say the mania and resulting carnage occurred mostly within one asset class, today’s bubble is spread across, well, pretty much everything – hence the term “everything bubble.”

When this one pops there won’t be a lot of hiding places.

Way too much money
Most bubbles start when an influx of outside cash sends the price of something up dramatically. This captures the imagination of the broader investing public and the process takes on a life of its own, culminating in an orgy of bad decisions and eventually a wipe-out of the easy fortunes made on the way up.

So to understand the everything bubble, let’s start at the beginning with that influx of outside money. This time it’s coming from the Federal Reserve in what can only be described as the mother of all print runs. M2, a medium-broad measure of the US money supply, has more than tripled so far in this century, and lately the arc has gone vertical, rising by nearly a third in just the past year.

M2 everything bubble

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The Stock Market Is Broken, Now for All to See, by Wolf Richter

The stock market seems like a great place from which to stay away right now, for a variety of reasons, not the least of which is because it’s a rigged game. From Wolf Richter at wolfstreet.com:

The historic short squeeze, engineered by a bunch of deeply cynical small traders, exposed just how rigged the market has been.

It has finally blown into the open for all to see. The stock market has been broken for a while, for a long time, actually. The idea that the stock market is where price discovery takes place on a rational transparent basis, with ups and downs, and some amount of chaos, but free of rampant manipulations – that idea has now totally imploded.

What has been visible for a long time but now blew into the open is just how manipulated the market is, by all sides, how overleveraged the big players are because the Fed encouraged them to, and how enormous the risks are, and how crazy the trading strategies are.

And the stock market soared to record out-of-whack valuations, in a terrible economy where at least 10 million people have lost their jobs and are still out of work, and where entire industries have gotten crushed. The whole thing is propped up by stimulus and bailout payments to consumers and companies alike.

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The Stock Market, Fatally Wounded by the Truth, Will Stumble and Crash, by Charles Hugh Smith

Pull the curtain back on the financial system and it’s obvious to all, there’s nothing there. That’s been the case for quite some time. From Charles Hugh Smith at oftwominds.com:

It didn’t have to be this way, but this is the reality we must now face: truth is fatal to fraud, and our entire financial-political system is a fraud.

The stock market has just been punctured by the thin blades of truth. It is fatally wounded but nobody dares notice. The wounds are barely visible, but the internal damage is mortal. The stock market is already stumbling and will soon crash.

The banquet’s participants ignore the faltering market because the rules are we never reveal the truth, or acknowledge it, or discuss it, no matter how obvious, because truth is fatal to fraud. So the stock market’s vital signs are in freefall but the conversation remains upbeat and light: stimulus, rapid growth in the second half, etc., all the patter of a carefully constructed illusion that fraud is forever as long as the truth never comes out.

Alas, the truth has emerged from the shadows, despite the silence of the insiders and the financial media. Here are the truths that have emerged like karmic genies:

1. The stock market is nothing but one giant fraud. The entire market is corrupt and rigged from the ground up. The fraud is systemic, designed into every tendril of the market. It was a useful deception to blame it all on “bad players,” but now the truth has been revealed: the market is nothing but a rigged game enriching insiders.

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Peter Schiff: Biden Takes the Helm of a Sinking Ship

The ship of state has been taking on water for a long time, and Biden is just lucky enough to be head of state as it sinks. From Peter Schiff at schiffgold.com:

Joe Biden was inaugurated on Jan. 20, becoming the 46th president of the United States. And as Peter Schiff put it in his podcast, he took the helm of a sinking ship.

But the stock markets sure don’t act like the ship is taking on water. All four major stock indices closed at new record highs on inauguration day. Peter said this proves that the stock market rally really didn’t have much to do with Donald Trump.

If the stock market gains were really attributable to Donald Trump’s policies, and Joe Biden is already unwinding those policies and reversing as many as he can by executive order, why are all the stock markets making record highs? To me, that shows you that the stock market couldn’t care less about Biden being president, because it didn’t matter that Trump was president. This stock market rally that Donald Trump took credit for was not the result of Donald Trump’s policies.”

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Doug Casey on the Rise of Day Trading and Why it Will Lead to Financial Disaster

Take it from a former bond trader: trading is one of the toughest ways in the world to make a living. Your biggest enemy is yourself—your own psychology. From Doug Casey at internationalman.com:

International Man: The Fed’s unprecedented money printing, trillions of dollars in government bailouts, and artificially low interest rates have changed people’s behavior.

There’s a shift from saving to spending, borrowing, and gambling.

Many people are becoming day traders who otherwise would not. They’re treating the markets like a casino.

What are your thoughts on all this?

Doug Casey: The stock market originated as a means for raising capital for new productive ventures, a means of price discovery for what they were worth, and a means of providing liquidity when investors wanted to buy or sell. An entrepreneur provided an idea and the labor, and the public provided the capital. It was simple, and useful to everyone. But a relatively minor part of the economy.

The stock market has mutated tremendously, however. Now trillions of new politically-created dollars are inundating the system. Over the last decade especially, it’s become a vehicle for speculation more than anything else.

There’s nothing wrong with speculation, of course. But it’s very different from investing. An investor adds his capital to others’ labor, plants a seed, and hopes to reap a harvest. A speculator, however, is generally someone who attempts to profit from facts or events that aren’t well-known or understood. Often things with a political flavor. There would be few speculators in a true free market economy with sound money.

Worse, when billions and trillions of new currency units are created—like now—the public is almost forced to do things they normally wouldn’t and shouldn’t. Like make wild bets on things they don’t understand, for “fear of missing out” on a runaway bull market. At some stage they’ll gamble on anything, trying to outrace the currency’s depreciation.

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Exposed, by Sven Henrich

Monetary policy has become exclusively about the care and feeding of the stock market. From Sven Henrich at northmantrader.com:

While this weekend’s headlines are dominated by who got exposed to and infected by Coronavirus from the President on down I want to make sure other key news items are not lost in the shuffle, specifically those that expose a system that has self corrupted itself and is desperately trying to keep the balls in the air while causing ever more long lasting damage to our global economy.

Let’s face it: This week’s market action was dominated by dozens of stimulus headlines. Stimulus progress and markets rip higher, stimulus disagreements and markets dropped lower exposing markets again to be a toy thing of the liquidity game.

Will they or won’t they is the question on everyone’s mind and many bets are placed that they will, for likely they must as the jobs growth picture is slowing dramatically from the summer sugar recovery high and keeping markets and consumer confidence high into the election is a political imperative.

nd don’t think for a second that they are not political imperatives. Market levels are as much a national security imperative as is having a strong military. For the last few years Larry Kudlow’s curiously timed TV appearances have become a fodder of Twitter jokes and yours truly has been at the forefront on Twitter of mocking the ever so obvious attempts to manipulate markets higher at every corner and opportunity.

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