This is another post from Ol’ Remus at The Woodpile Report. I like his style of writing quite a bit, and agree with him entirely. He is forecasting catastrophe – and how could it be otherwise?
And yet I get the US Trust “Investment Strategy Overview” newsletter in the mail, and, of course, it is completely in opposition to Ol’ Remus – it’s bullish! Apparently, we are only 5 years into a bull market of 20 years! Major advances in technology are coming! Progress towards US energy independence! A manufacturing renaissance! The imbalances of the past cycle are correcting themselves! Etc.
How does one reconcile these two views?
What an absolutely bizarre time we live in, when there is such a massive disconnect between the mass media hypnosis and reality. Every day is another chapter in Cognitive Dissonance…
The coming unpleasantness
The guilty are sneaking away unpunished, nobody’s fixing anything, there’s an orderly-so-far devaluation of the dollar going on, the Treasury has fallen into the hands of counterfeiters and the election process has gone third-world. The home folks are broke, or nearly so, and unemployed, or about to be. Suddenly they understand DC isn’t on their side and now they’re debating whether DC is run by the criminally insane or the merely criminal. Oh yeah, this will end well.
According to a new study by the Russell Sage Foundation, the inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36% decline… it’s not merely an issue of the rich getting richer. The typical American household has been getting poorer, too.
Tyler Durden at zerohedge.com
Now the people who warned of 2008 are saying the market is running out of Greater Fools. They say few retail investors are in equities that don’t have to be—meaning the funds, the 401ks and IRAs, the insurance companies, the compulsive gamblers. And those that don’t hate the market fear the market. They say it’s a gas leak looking for detonation. They say the event will arrive before the warning does.
There are usually no warnings that trouble is coming because everyone at the top of the financial food chain are highly incentivized to keep quiet about problems… Just about every CEO from every major bank spent much of 2008 claiming that all was well… As former banker Jean-Claude Juncker put it, “When it becomes serious, you have to lie.”
Phoenix Capital Research at zerohedge.com
In early 2008 I noted a fairly serious decrease in online “revenue per impression” in the advertising space. This was not reflected in so-called “official” reports from various online ad firms, but I saw it quite-clearly across data I had available to me. What followed, of course, was quite clear in the markets. I am seeing the same pattern develop now.
Karl Denninger at market-ticker.org
Due diligence and fundamentals count for nothing because the arithmetic makes no sense, successful investing amounts to insider information and front running the Fed. The oscillations are wild and coming closer together. But still it goes up. One day it won’t. The crash will be 2008 on afterburner because no one trusts anybody, no one honors anything, no one believes anything. The flash-crash will look stately by comparison. It’ll be like being pushed out of a tree in the dark—pain and terror every inch of the way.
Another horrific stock market crash is coming, and the next bust will be “unlike any other” we have seen. We have never had this before. It’s going to be very painful for investors.
Jeremy Grantham, GMO, via moneynews.com
Warren Buffett’s “best single measure of where valuations stand,” comparing the market value of US companies to the gross national product before inflation, is flashing near record bubble red. Still we are sure, you’ll be able to exit before everyone else when this ends.
Tyler Durden and Bloomberg at zerohedge.com
The most reliable valuation measures have never been higher except in the advance to the 2000 peak (and for some measures the 1929 and 2007 peaks), but they have started to treat these prior pre-crash peaks as objectives to be attained… Make no mistake—this is an equity bubble, and a highly advanced one. On the most historically reliable measures, it is easily beyond 1972 and 1987, beyond 1929 and 2007, and is now within about 15% of the 2000 extreme.
John Hussman at hussmanfunds.com
We have no right to be surprised by a severe and imminent stock market crash.
Mark Spitznagel via moneynews.com
The market isn’t the economy, true enough, but a couple dozen trillion dollars isn’t exactly budget-dust. The citizenry would see a yawning crater where their 401ks and IRAs used to be. They’d notice when their checking account is gone but their debt isn’t, and when the ATM doesn’t recognize their account number, or when their bank is an empty storefront and their car loan has been sold to Vinnie, or when their insurance company doesn’t answer the phone. As always, people don’t go nuclear until reality invites itself into their living room and defecates on the carpet. That’s when things get interesting—when people notice, when they have to face what was formerly unthinkable and their only fallback is what good people they are.
Those who drove the financial bus off a cliff know the controls still work fine—the brakes and accelerator and steering wheel, all of ‘em, but when the rubber isn’t on the road the effect just ain’t the same. But all that “driving” stuff keeps the passengers from panicking. We’ve seen the grandest larceny in all history. Now, after we’ve been cleaned out, we know the wacko conspiracy guys were right. In fact we’re worse than cleaned out, the place has been turned into a debtor’s prison from sea to shining sea.
Some would have us believe things are turning around—the market’s up and the trend is your friend. Trend? Trend?! The market made gains after the Crash of 1929 too, genuine record recoveries. “Prosperity is just around the corner” referred to those 1930-1931 upticks, not to the unstoppable plunge that followed. As they say, it’s not the fall, it’s the sudden stop. The fall itself can be surprisingly profitable. But what a fall it was. By July of 1932 the Dow had dropped from its high of 367 down to 41. Ten years later, in April of 1942, it touched 100 or so, and that was after foreign panic-money poured in from a Europe at war. The highs of 1929 weren’t seen again until the 1950s. That’s a trend.
There’s always been fraud, but sometime in the recent past the market buckled in a fundamental way and the fraud poured in. Proven reforms painfully enacted over decades were swept away. Fundamentals no longer counted. Creative finance counted. Bubbles and deceit counted. It became a criminal enterprise top to bottom. Accounting firms and regulatory agencies went over to the dark side en masse. As Mark Twain said, every profession is a conspiracy against the common man. Finally the retail investor did something sensible—he ran for his life.
The players left are those who have to stay; the funds, the retirement accounts, the insurance companies, et al, and HFT piranhas are eating them alive at millions of tiny nibbles a second. What used to be an investor’s clearing house has become a betting parlor on the Federal Reserve’s next move. The market goes up on tiny volume and bad news, and way up on very bad news and nearly no volume. They know dark horizons light up the printing presses. Meanwhile, the banks don’t know what they own, or don’t know what it’s worth, but they do know they’re insolvent and so does everybody else. So DC gives money to the banks and then pays the banks to lend it back to them. It’s IOUs paid with IOUs and they can’t write ‘em fast enough.
The bottoming is not completely done. In fact, it has barely even gotten underway yet. We keep propping up losers. The result is we still need to see a repudiation of debt at a massive scale and until that happens, the Long Wave bottom won’t be here. We’re just dancing on the front end of real economic collapse.
George Ure at urbansurvival.com
What to do. The demand for collateral will be ferocious when the debacle starts. Treat debt like any other roadside bomb. Staying current isn’t enough. Any collaterized debt is too much debt. You can’t know which exit is the last exit. The grace period with the trillion-dollar price tag is ending and it’s ending badly. This disaster has been bought off for decades. When it happens it’ll go down fast. Exactly how and when can be sorta-kinda foreseen but not actually known. A cascade can start from anywhere. But this much can be said: the collateral chaos will hit the system like a weapons-grade laxative. Everything that’s been contained, covered up and denied will come spewing out looking for daddy. It’ll take weeks, not months to come apart. Maybe days.
Get as independent as you can while you can. There are parts of this game where the only winning move is to not play. Doesn’t mean you have to go all Rambo and head off to some mountain valley, although that’s one way. But it does mean putting stuff by so you can get by. “Stuff” means food stored long-term and the wherewithal to get or grow more, uninterruptible for-sure potable water, an off-the-grid heating system, meds and medical supplies, clothing for hard times and hard work and being out in life-threatening weather because you have to be, the means to defend hearth and hoard, batteries and a way to recharge them, cash and real money—meaning gold and silver—all the things you already know but haven’t done. Knowing isn’t doing, doing is doing.
FDR‘s bailout of the Federal government also went so far as to also issue Executive Order 6814 “Requiring the delivery of all silver to the United States for coinage.” And what was that worth at the time? In terms of present dollars, that works out to about $22.77 per ounce. Given that silver is trading below current dollar equivalents of the Depression confiscation prices and gold is still trading at 3.44-times Depression confiscation prices, my personal bias may be inferred.
George Ure at peoplenomics.com
Plan B. If you’re in a city, have a viable destination and two or three tried and proven ways to get there. Practice and take notes. Again, only doing is doing. Plan as if your life depends on it. Take a hike, go the hard way through the hills and woods, you’ll discover how long an unpaved mile can be. Make a squirrel dinner, yes they’re cute, but there may come a day when only one of you is going to live. Besides, they’re yummy. Mankind acquired these tastes over geological epochs, you’ve not lost them, merely misplaced them.
Everything seems obvious and predictable in retrospect. This stuff is pretty obvious and predictable now. And there are always better reasons to not do something than to do it. You know most people won’t get serious until after it was absolutely necessary. Too late. They’ll fail, mostly. Worse, they’ll needlessly fail at the easy part of the learning curve. Prepared is prepared, you are or you aren’t. Do what you can. And as always, stay away from crowds.