Money Printing

The Federal Reserve money printing is causing assets like the stock market to behave as if we were in a very healthy and even robust economy, which of course we are not. Don’t make the mistake and think that we are.

Two-Step Strangles

Bail Out

The Treasury and the Federal Reserve are bailing out virtually everyone, but who is going to bail them out?

The Treasury does this by taking on more government debt; while the Federal Reserve does this my magically creating money from simply expanding their balance sheet. In both cases, in other words, the money used to bail everyone out is created out of thin air. When this charade ends and this house of cards collapses, who is going to come to the rescue?

Public School Disasters

No More Recessions

Federal Reserve has now banned recessions — at a cost of 7 trillion.  There will be no more recessions.  So, in a sense, there is no longer any risk in investing in the stock market — it will always go higher, it will never really collapse.  Kind of like the ultimate in chrony capitalism, no?

The stock market and the bond market are completely phony, but they are the only game in town, so everyone plays them, especially since there is so much cheap money around to play them with — cheap money as in free money from the Federal Reserve.  It’s all insane, but what choice is there?

Financial Chicanery?

Stock Market Direction?

Everyone is wondering now if this is a V-shaped recovery or if we are going to retest the bottom (around 2200). If we retest and break through, there is a very strong support level at 1600 because that was the top of the market in 2000 and 2008. If we do see a collapse, I don’t think it will go below that level.

I’ve been seeing suggestions that the mortgage market is broken since banks are now demanding higher interest rates because they are anticipating layoffs and want to be compensated for taking on the credit risk. It could be the overpriced real estate market is very shaky here. So a collapse in the housing market could be the trigger — again.

Layoffs and Savings

Stock Market and Impeachment

Stock market is reacting as if the impeachment proceedings don’t even exist.  If it was taking them seriously, as the constitutional crisis that a real impeachment would represent, the market would be down at least 20% in bear market territory.  Instead, we see new highs daily.

So the collective wisdom of the market is saying this impeachment exercise by the Democrats is a complete sham.

My Story

Bond Vigilantes

They used to have something called the “bond vigilantes” keeping the bond market honest and correctly priced.  There weren’t any actual people acting as vigilantes per se, but it was the general tendency of the bond market to adjust for either risk or inflation by demanding a higher rate of interest at a lower price.

The bond vigilantes have been basically asleep now for the last 10 years.  We even have negative interest rates with a great number of bonds issued by governments.  Central banks have taken over this market as a way to inject cheap money into their economies, so that the government debt market is highly artificial with central banks the one big buyer.  Think of that — you actually end up losing money by buying these government bonds and the bonds are sold at a very high price to boot, which is all due to the manipulation by central banks.

I think when the bond vigilantes finally wake up from their long slumber is when this current bull market implodes.  It will happen first in the bond market — you can easily make the case that the bond market today is even a bigger bubble than the bubbly stock market.  With interest rates rocketing higher, you would have huge losses in the bond market because the bond prices would be collapsing sharply — perhaps 50% losses in a short amount of time.  This magnitude of loss would have a ripple effect into the stock market, which would then have panic selling as well.  That’s when the whole house of cards comes crashing down.  Who knows how low both the bond market and the stock market would go?

Just wait for the bond vigilantes to wake up from their 10-year sleep.  Best to be out of both the bond market and the stock market when that happens — or invest in a very good parachute.

If interest rates really start to rocket higher, that would be a good time to short the stock market, in my opinion.  But it is very hard to time these things.  If you are short too early, you will be punished.

My Story