Chinese spy balloons floating over the United States. Interest rates at 5%. The economy in full collapse. Inflation at 6%. We'll send you a postcard - everything's fine!
The market is also ignoring, among other things, the invasion on the southern border. 1000s of (mostly) military aged men from all over the world, including China, are being not only allowed, but assisted, in entering the country. Where they then (temporarily in my view) disappear into the heartland.
There is zero chance this ends well. We are at war on multiple fronts, internally and externally. A whole lot of “buy the dippers” are going to get their asses handed to them. My guess is in the near term.
Keep up the great work. Rational voices in short supply these days.
Hey Chris, I think I figured out what the 'credit event' you have been eluding to will be: Consumers.
They are going to stop paying their debts - auto, student, credit card and mortgage.
Think about it. It's perfect and it is already starting with auto loans.
With all the potential catalysts to 'prick the bubble', this is the most obvious that is being overlooked.
This was the catalyst for the GFC with mortgages.
People don't feel obligated to pay debt, in fact the government is signaling with student loans that it's not important.
Then there is the 'cancel rent' movement.
Let's face it: people only pay their debts to maintain a credit rating to get more debt.
What happens when they first default? They go all in!
Consumers will spend until they can't. And then they won't pay debts before they stop buying.
They'll be underwater on their mortgages, just like they are with their cars.
Timeline: It'll be in high gear by summer IF Biden stops the student loan moratorium.
I hate to say it, but if they do keep ignoring reality, it's only better for those of us who aren't reality-deniers. It turns out, propaganda is powerful and some people will drink the kool-aid, even after those around them start dropping.
Great read Chris, you are right on target. Also heard that Putin is threatening Great Britan with a nuclear sub attack, but hey, buy the dips, damn the torpedos.
This reminds me very much of the closing scenes of The Big Short when the protagonists are freaking the F out as the mortgage bonds they've shorted have failed but the big investment banks are still pricing them as solid. This market is no different. Once the usual scum bags have unloaded their dog shit onto their own customers, only then will the inevitable correction happen. And once again, the perpetrators of the crisis will walk away with the cash. Moral hazard be damned. What a great system.
haha “If you’ve been a short term trader and have made money off this move, I commend you” — that’s me! 😆 but I agree with you that come Q3 2023 and next inflation reports will be rough. Financial conditions are too loose and got looser and it’s all euphoric and soft landing but I’ll gladly ride it up and then ride it back down 💪
Thanks Chris, you’re spot on as always IMO... these last few weeks have been rough, is what it is.... we keep moving fwd... I’d say go Eagles, but since it’s not the Evil Empire Patriots, can’t do it.... should be a great game though !! Cheers !!
Another great article Chris. I especially liked your summary in the last few paragraphs. Everything seems out of whack (AU dropping $100 in the last two days?) but revision to the mean will happen soon in enough in 2023. 99 luft-sino Balloons forever!
Thanks for the picture of the fire. It made me laugh because it reminded me of the pajama boy commercial. I hope my son chooses football and beer.
If the Fed does pivot, do you guys think will it be IF we go to war to fund it with 0%? Praying we don’t go to war
If one is a bear in a market that is exhibiting strongly-bullish technical patterns, he must prove to himself how it's possible for the Treasury to endure a 5 or 6% fed funds rate. It seems to me that what the market has been saying is "Powell may talk like a hawk but his hands are tied by the US's fiscal situation." As further evidence of that, consider that liquidity has been improving since October, despite the rate increases and QT.
Good article as usual. Will be sharing it today @https://nothingnewunderthesun2016.com/
Well said. Post-WW2 Americans live in a bubble. Nothing bad can ever happen no matter how many times it does.
That 2-3 trillion $ sloshing around is still frothing the punch bowl.. it’s probably at the level of fumes now..
Great article... Mortal Kombat reference get automatic +1. On the one hand its naive to think that China wouldn't push back after our continuous meddling in their neighborhood. On the other hand, how did the government let the balloon get all the way to Montana before saying anything? Rather than guess if the balloon is harmless why didn't they intercept over Pacific ocean so they could retrieve it for inspection? If anything, isn't this inspirational to North Korea---Rather than deal with the messy mathematics of ICBM missiles now they can just launch balloon army to bomb us or Japan. Or maybe this is just some inside poker between the Federal Reserve and the national security apparatus to see who can lead us to ruin first...