In 2017, Danielle DiMartino Booth published Fed Up.
Her book was an insider’s take on why the federal reserve is bad for the US.
Since then, what was bad for the US has only gotten far worse.
In ‘rescuing’ the market last year, the Fed has fostered a risk-taking mentality that in my opinion and experience, exceeds all previous bubbles.
Retail investors — emotionally charged by easy to use trading apps and social media — are storming the capital markets.
According to MarketWatch on 24 January 2021 (emphasis added):
‘GameStop‘s stock is on track for its best monthly rise in its history, up 245%, as retail-investing fanatics touted the stock and urged users on finance-oriented social platforms like Reddit to buy the shares to squeeze activist investor and noted short seller Andrew Left’s Citron Research.
‘The actions of fanatic investor groups have gone beyond name-calling and hacking attempts and included what Left described as “serious crimes such as harassment of minor children,” MarketWatch’s sister publication Barron’s wrote.’
I’ve never heard of GameStop, so, I thought I’d take a look at why it’s going gangbusters. The stock is trading around US$65…less than six months ago it was US$5. Earnings must be good? No.
The stock (on 12-month trailing earnings) is losing US$4.22 per share. But who cares? The Fed will keep it going up.
Jerome Powell (Chairman of the Fed) should hang his head in shame. He and the other ignoramuses of history, who make up the Fed board, have turned Wall Street into a (even bigger) casino.
Danielle DiMartino Booth’s book title captures my current mood…I’m fed up with our continual failure to learn from history.
What compels us to keep repeating the same mistakes over and over again?
If it was child who always kept getting into trouble, our frustrated response would be when will you ever learn? Or as some of the teachers in a bygone era used to say, what does it take to get it through that thick skull of yours?
Yet the lessons of markets past continued to be ignored each and every time a market is in hot pursuit of record levels.
The laws of mathematics are temporarily suspended while punters indulge in these flights of fantasy…somehow believing this time is truly different from the past.
It never is. Same fervour. Same inane thought processes. Same outcome.
And the really cruel twist is, the longer a market avoids its fate with destiny, the greater the number of people who start entertaining the tantalising prospect of ‘it’s a new paradigm’…and it appears that fanatical belief has taken on an increasingly aggressive tone.
Unless human nature changes, we are perpetually doomed to learn the hard way.
The market bear has spent the past months patiently sharpening its claws
Over the centuries we’ve made huge advancements by learning from the mistakes of our predecessors.
The rapid progress in technology, medical science, space travel and health is all thanks to our willingness to learn, improve and evolve.
Yet when it comes to markets, we are still as gullible and clueless as those tulip buyers of 400 years ago.
We think we are smarter, but our (collective) actions prove otherwise.
History tells us emphatically that debt crises — without exception — always end badly. Debts are defaulted on. Businesses go bankrupt. Creditors lose money. That’s how debt is expunged from the system…very, very painfully.
Based on the laws of yin and yang, the more debt that’s in the system, then the more painful the expunging process will be.
The higher we climb, the harder we fall. Not such a difficult concept to grasp.
And here we are today…sitting atop THE greatest debt pile in history.
Since 2008, global debt has increased from US$140 trillion to over US$260 trillion.
How can anyone possibly think this deteriorating financial situation makes us stronger and not weaker?
Seriously, as a society, how stupid are we to believe the nonsense being pedalled by central bankers?
What we’ve seen since 2009 is the illusion of growth…the positive GDP numbers are nothing more than all that new debt being pumped into the system.
This isn’t real growth born from genuine productivity. It’s just make-believe growth spawned from cheap lines of credit.
The prime example of this is the US government issuing (low interest) bonds to finance its ‘stimulus’ programme…sending cheques out to all and sundry to spend in the economy.
Biden’s US$1.9 trillion ‘manna from heaven’ will be recorded as ‘economic activity’ in the GDP numbers. What absolute rubbish. Garbage in, garbage out.
The central bankers and the legislators have created a world of economic illusion.
Maintaining this artifice of deceit gets harder with each passing month.
Can the market keep posting record gain after record gain? Can debt continue expanding at an exponential rate to generate $1 of GDP?
The answer to both questions based on mathematics and logic is an unequivocal NO.
At what point does the system crash headlong into the immoveable reality of you cannot solve a debt problem with more debt?
For those who doubt this reality, then I’ll pose these questions…
Can you cure emphysema by smoking more cigarettes or obesity by eating even more fat laden fast food or alcoholism by drinking more hard liquor?
In the world I inhabit, the answer is of course not.
We are (literally and figuratively) living on borrowed time.
If history is a guide, we must be getting awfully close to the US market facing another (even more severe) test of investor mettle.
The market bear has spent the past months patiently sharpening its claws.
Investors who have invested purely on the momentum of the capital market looters and plunderers are going to get mauled very badly.
My guess is it’ll be them, who, at some stage get Fed Up with a market that’s turned brutally bearish.
Editor, The Rum Rebellion