I wonder about the effect of the downdraft rotation where The Dow is no longer leading the market down while the S&P alternates between up and down and the NASDAQ steadily moves higher.
Suddenly, the NASDAQ is on the way down with the FAANG stocks leading the way. Admittedly, you could hardly call this a trend -- two day runs down or longer do not a negative tech market make. But you have to worry about earnings and reports that a plurality of NASDAQ stocks will report, or have already reported, negative quarterly earnings. That's a reason for at least a pause in bullish investor psychology.
For my part, I expect the mother of all crashes to come within a matter of a few weeks, if not next week. I don't base it on the traditional business cycle of boom and bust. Rather, I see The Fed as the ultimate doom machine for these markets. Here's why: The Fed's counterfeiting cannot prevent a severe recession, or more likely, an unheard of Depression, because inventing liquidity and being both the buyer and seller of last resort of anything and everything is quite simply financial idiocy. You saw it first with the voluntary purchase of junk bonds and other non-investment grade products. Absolute insanity. The next clue came when The Fed tried to repeatedly taper -- that had the same effect as taking away a pacemaker from an otherwise dying patient who suffers from chronic cardiac insufficiency. You turn it off and the patient likely dies. And so it was with markets -- tapering immediately led to market cardiac arrest and investor panic. That clearly showed that QE to Infinity is exactly that: it has to go on forever otherwise markets tank to unprecedented levels to accurately reflect the true nature of the DOA American economy.
The Fed did not follow the old adage of being careful of what it wished for and now they are seemingly committed in perpetuity to artificially holding up markets that would otherwise have already been destroyed ages ago.
Like in 2008, Fed intervention lessened the severity of the crisis and put off the eventual date for a considerable market collapse, which ultimately came in spite of their various interventions in capital markets. In 2020, multi-trillion dollar infusions will have exactly the same effect until they don't. Because of the unprecedented monetary levels of Fed intervention, not only will the crash be delayed but its energy when it finally comes will have been pent up and considerably magnified. So, when it inevitably hits, it likely hits with ten times the force it normally would have had but for QE, MMT and the widely expected Yield-curve control.
Despite the monetary lunacy, the markets have reasonably held the line subsequent to the March lows. That's because Fed policy has encouraged increased deflation. But ominous signs lie ahead with The Fed purportedly prepared to allow inflation to push ahead of its traditional core inflation target of 2%. That's called The Fed playing Russian roulette with the markets and the economy. If inflation begins to take off, it will be game over for this economy already on life support. First will come stagflation and ultimately hyperinflation should The Fed lose total control.
All of this to say that the FAANGs are probably the canaries in the coal mine and NASDAQ earnings the big bad wolf approaching the hen house. In my book, now is the time to get out fast if you haven't already done so. Pray that stock markets don't drop 70-80% because if it comes, or should I say when it comes, the bear market could very well be of that order of magnitude.
Anyone else notice that Chagger is the unfortunate Liberal MP for W-A-T-E-R-L-O-O ? Interesting. Are the WEGovernmentTM about to throw their unsuspecting Junior Minister under the bus? Of course they are! They will do anything -- and I mean absolutely anything -- to save this Prime Minister's hide, not to mention Morneau's.
You know what they say about selling (or in this case, buying) your Mother to hold onto power. That's quite literally, the only thing that matters to them other than finding out which Liberals actually sent the WE manilas to both CBC and The RedStar. Good luck with that.
So, the PMO is shaking in their boots as successive polls come out showing the Liberals on a down slope in the wake of the WE iceberg. Most of it remains below the water line so this is definitely not the beginning of the end but more like the end of the beginning. Keep your eyes peeled for subsequent rounds cause they are coming.
I can't wait for Morneau, Trudeau et al. to hit the little screen. Warren Kinsella reminded us how you can tell if an ad will hit a home run by watching it first and several times more without the audio.
I'm going to suggest a variation on that technique: watch the Finance Committee statements and answers to questions by carefully scrutinizing body language. It will tell you if the witness is sincere, honest, credible and even repentent. Under the worst of circumstances, it will telegraph an ongoing snow job.
By now, you all know the plot and its ins and outs. Morneau, Trudeau and Telford will be in the process of hand bailing RMS Titanic so don't expect a miracle from them.
Or if it's an unmitigated disaster, expect to see in quick succession Margaret, Alexandre and Sophie before the Committee.
There is an out for Trudeau in all this but his sense of entitlement and arrogance should insure that they never come up with it.
So, watch them sweat and enjoy. They made their WE bed and now let them lie in it.
People will view this post's title and think What? Some won't like a direct illustration of same while others won't like a current CPC member writing it. T-O-U-G-H toenails as we used to say.
This isn't about competence or growing into the big job. This is all about what you do with power -- how much you push the envelope -- or even worse, going so far as to quite deliberately break the political consensus rubber band. That's precisely why Harper lost in 2015 and why Trudeau will lose now.
By and large, Canadian voters don't like or feel comfortable with either deep self-inflicted lurches to the right or left. They tend to like that happy medium, you know, the Canadian thing. But that didn't stop Harper, so they threw him out on his ass. I give Harper credit though on election night for publicly acknowledging the loss and putting the entire responsibility for it on himself, where it rightly belonged. In my early CPC days I continually pushed for a moderate-reflecting potential majority. By the time I left in 2009, I frankly was down to not giving a shit.
Now, let's move on to Trudeau who I supported in 2015. I expected a majority government and that's what we got. But for the record, Trudeau turned out to be no Harper, sometimes good and other times not.
Like Harper, Trudeau lowered his head and began bulldozing. This Prime Minister saw absolutely nothing wrong with how HE handled SNC and it's more of that now. His family's nepotism par ricochet is seemingly just fine by him. It's blinders time galore, so what else is new? Trudeau is by no means your average Canadian -- he remains entitled have been born with a silver spoon in his mouth -- in the patronage cesspool commonly known as Ottawa.
The guy represents Papineau and somehow thinks this will wash over in the blink of an eye. Guess he has no clue what Québécois and Canadians really think. He's about to find out though, in spades.
Fortunately, we can all count on the next election to properly cleanse this unseemly affair.
Not. Welcome to nutcase heaven: 51 million unemployed, The Fed's balance sheet well on its way to 8 trillion with apprehension quickly setting in after only four days of tapering -- so guess what, that's the end of tapering. But The Fed can't keep it up forever.
Now, let's move to market bifurcation: NASDAQ keeps going higher with lesser and lesser daily point gains, along with The S&P, while The Dow sinks. That means The Fed's next trick pony will be the inevitability of buying stocks directly. Titanic lifeboat time!
Meanwhile, investment and money-centre banks are already insolvent with bank stocks taking on only a 35% down draft that has Dimon worried and unusually fortright.
Then this gem: 33% of companies filing for bankruptcy protection handed out bonuses to those sub-par executives and management...
But not to worry, while all other stock indices tanked in 2000, 2008 and 2020, the NASDAQ continued to rise -- until it finally didn't. I'm long out so for those of you still in, enjoy the ride until you don't. A 70 to 80% drop is not far off. Greed is winning out over fear in a foolishly complacent stock market. In the end, panic beats 'em both and is presently warming up in the Green Room.
As a result, what kind of a recovery are we in for? It's called an L. Sorry about that, but that's reality.
Unfortunately, a lot of you wouldn't know the NASDAQ bubble if it smacked you in the face. It makes daily new highs while the S&P and Dow make far lesser gains. What does it mean? Frankly, that Tech will be the last pillar to come down and ultimately roll over.
The economy is dead, period. Capitalist markets are all about income statements, balance sheets, debt reduction or elimination, growing revenue and solid and increasing quarterly profits. We have none of that now.
I don't know which is worse, a Fed that prolongs a sugar high by printing counterfeit money thus delaying the inevitable and ensuring the increased ferocity of the downturn, or a Fed that finally largely pulls the plug now what with successive days of tapering -- bye, bye, nightly injections of countless trillions to prop up already insolvent banks in a repeat of 2008. Either way, large cap and dividend stockholders are about to lose big time.
So again, get the hell out of the fucking markets and thank God for the profits made. You did that during a market cycle with wildly and totally unacceptable risk for large-caps. Remember that only greedy pigs hold on to the bitter end and get burnt every single time.
The Fed has finally bowed down to reflect reality and is serially tapering the sugar high with each passing day. That will take the market down and it will make 1929 look like a Sunday picnic. Foolish speculators going forward have to be right every single trading day but the crash inspired by disastrous debt, deficits and an inexistent economy only has to hit a home run once.
We're talking Depression and it's coming far sooner than later. Only the incredibly economically deluded can't see it on the horizon.
Political pros will immediately recognize that it's not about the WE Charity and Margaret or Alexandre per se, rather it's all about Justin Trudeau and his performance as Prime Minister. No one cares about speaking fees paid to private individuals -- even when allegedly paid to members of Trudeau's own family.
What this is really about is about summer jobs for students and the political necessity in this PMO's eyes of sole-sourcing a contract to a charity that is at the very least, sympathetic to this government. This Prime Minister admits that he did not recuse himself when cabinet made the decision -- pretty good chance as well that cabinet was not informed about the speaking fees allegedly paid over time.
Then there's the matter of the PM defending the contract and seemingly indicating that WE was the only organization suitably qualified to properly handle the manner. And then, after the climb down, suddenly public servants were sufficiently competent to properly administer this program...
If opposition parties correctly play this out, the ballot question won't be about COVID-19 or even economic issues. Rather it will be all about Justin Trudeau's alleged possession of political judgment and elementary common sense.
If we've learned anything about this government in the wake of India, SNC-Lavalin and other controversial issues, it's that this Prime Minister doesn't even remotely have a feel for these things, even after being at the helm since 2015.
In short, it's all about judgment, you know, the kind that Trudeau hasn't got and apparently wouldn't recognize if it tapped him on the shoulder.