Stocks and Precious Metals Charts - Der Untergang - The Madness Serves None But Itself

 

“Everyone thinks of changing the world, but no one thinks of changing themselves.”

Leo Tolstoy 

 

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." 

Rudiger Dornbusch 

 

"Reasoning is no use; facts that contradict personal prejudices can simply be disbelieved — indeed, the fool can counter by criticizing them, and if they are undeniable, they can be just pushed aside as trivial exceptions.  We shall never again try to convince a fool by reason, for it is both useless and dangerous." 

 Dietrich Bonhoeffer

 

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

Charles Mackay

 

Stock futures did another overnight pop, and afternoon flop.

Gold and silver rose along their support lines, and the Dollar continued lower.

 Netflix slipped its growth estimates after the close.

The stimulus, the election, and vaccine questions are three significant exogenous economic factors. 

John Oliver's discussion of the World Health Organization from his Sunday night show is interesting.

We are in the midst of the hysteria I had forecast.    QAnon is the latest face of it.

It seems almost ordinary, because it came on so slowly, and over such a relatively long period of time.

Its resolution may come more quickly, and leave many wondering what happened, and what they were thinking.

Most will move on, but some will stubbornly seek justification in stubborn denial.

Have a pleasant evening.

Stocks and Precious Metal Charts - The Darkness Rising - Twilight of Those Who Would Be Gods

"At dæmon, homini quum struit aliquid malum,
Pervertit illi primitus mentem suam."

But when the devil intends any evil against man, he first viciously corrupts their mind.

Euripides


"Nimirum insanus paucis videatur, eo quod
Maxima pars hominum morbo jactatur eodem."

He appears mad indeed but only to a few, because many are infected with the same disease.

Horace


"Though this be madness, yet there is a method in it."

Shakespeare, Hamlet, Act 2, Scene 2.

The retail sales number came in rather badly this morning.

There is no real recovery. Just a papering over of the rot endemic to oligarchy.

Gold and silver are struggling at overhead resistance.

Gold is much more interesting to watch here because of its nature as a safe haven.

And of course its central role in the changes in the monetary regime which have been called currency wars.

Stocks have reached the 38.2% fibonacci retracement level. They may keep on reaching for 50%.

It is reported that JP Morgan is holding $2.3 trillion in stock derivatives, or roughly 2/3rds of the entire market.

Let's see how this charade plays out.  My general forecast is for pain.

When intelligent, verbally acute narcissists start succumbing to continuing pressure they typically become paranoid, and then violent.   The mechanism for this is reasonably straightforward.

Their pathology is expressed in grandiose self-images and imagined and great exaggerated accomplishments.   When they fail to achieve their lofty goals, they start blaming others. Their narcissism turns malignant.

After all, in their minds they are fabulously talented and have never failed or even made a serious mistake.   So if there is failure, it cannot possibly be due to anything that they have done, but rather the failure of those who work for them.  And so there is a great deal of staff turnover.

And if the failures continue, there must certainly be some group that is sabotaging their efforts, in an effort to make them look bad.  Eventually their rage and words translate into acting out, and violence, most often against critics, potential critics and scapegoats.

There might be an epidemic of this sort of thing in the Beltway.

And then the darkness comes.

Have a pleasant evening.

Charlie Sykes: How the Right Lost It's Mind

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

Charles Mackay

As Thomas Frank is to the Democratic Party, Charlie Sykes is to the Republicans.

I have been no fan of Charlie, but he seems to have come to some very pointed observations worth hearing.

The GOP did not lose their minds—  they sold their souls for power and money.

But the real tragedy is that so did the Democratic establishment.

And then there is the 800 pound gorilla in the room that no one dares discuss—  the corrupting power of big money in politics, and in darn near everything else downstream, until thought itself dies by suicide, either from expedient convenience, or embarrassment.

Those among us who have for whatever reason remained relatively aloof from this madness, who follow a different way, wonder if they have changed, or if things have changed just that much around them.

But however it has occurred, increasingly they find themselves to be in this world but not of it, as if visitors, almost at times like strangers, in a stranger and stranger land.

The Roots of the Next Crisis, and the Dark Hallway Beyond

“Those who fail to exhibit positive attitudes, no matter the external reality, are seen as maladjusted and in need of assistance. Their attitudes need correction...

Suddenly, abused and battered wives or children, the unemployed, the depressed and mentally ill, the illiterate, the lonely, those grieving for lost loved ones, those crushed by poverty, the terminally ill, those fighting with addictions, those suffering from trauma, those trapped in menial and poorly paid jobs, those whose homes are in foreclosure or who are filing for bankruptcy because they cannot pay their medical bills, are to blame for their negativity.

The ideology justifies the cruelty of unfettered capitalism, shifting the blame from the power elite to those they oppress."

Chris Hedges

Here is a recent conversation I had with a friend about the current state of the US recovery.  As an accountant with a wide range of exposures, I enjoy hearing his perspective since I no longer have that sort of current insight into the corporate culture in America.  I have years of background running large businesses in corporations, and some forays into large scale M&A work, so I have seen quite a bit of it. The methods rarely change, merely the guises and degrees.

Here are excerpts from his side of the conversation with only one parenthetical comment of my own.

"I don’t think we’re seeing profits in a traditional sense. Instead, it appears to me that we’re watching a long, drawn out LBO’ing of America. It appears that companies are liquidating capital and returning it as opposed to earnings spreads on revenue.

It seems like we’re seeing the final blow-off phase that started with the stock option becoming the primary form of compensation for corporate talent. By drawing out the LBO, they re-stock their options each year with a guaranteed return thanks to the Fed and their own Treasury Departments.

The problem is that you can’t have systematic corporate buybacks with employment/economic growth as they create diametrically opposite outcomes. The more work I do, the more I conclude that the US economy has not expanded since 2006.

I was looking at mutual fund data the other day and it showed that people moved their fixed income money into domestic equity - $185 billion in liquidated bond funds to buy $175 billion in equity funds. This happened after the Fed announced tapering was on the table. Just like the gold market, I suspect that “someone” forced the liquidation of bond funds and herded the money into equity funds to keep the rally going.  (I think it is perfectly reasonable to flee bond funds at any time that interest rates are turning higher.  Bond funds often take it on the chin in such a deleveraging of a long term interest rate trend.   However, I think the whole taper thing was hyped and used by the wiseguys, as are most things these days by our financial masters of the universe. - Jesse)

Coincidentally, corporations used half a trillion in cash flow on buybacks. It’s a liquidity game but with limitations. What’s the next asset that can be liquidated or levered? They’re still working on gold but sometime soon, the price of gold will be set in the East, where the gold resides. Agricultural commodities are being liquidated but that ensures a drop in planting next year. Oil is too valuable on the geopolitical front to liquidate.

There are certainly winners in this economy but far more losers. At some point, the weight of the losers acts against the winners, many of whom are levered up with confidence. Corporations can liquidate equity capital but we all know how the LBO’d companies operated in the 1990’s. In many ways, they’ve gotten corporations to behave like consumers did in the 2000’s, only this time they’re trained to buy back their own stock. Every cycle has natural limits.

We know that corporate cash flow is no longer growing and we know that it’s more expensive to sell debt today than a year ago. We also know that the Fed sees the stock market as their proof of success. So how does this shakeout? If corporations are a lemon, how much juice can you squeeze out of the lemon?"

Although I do not wish to be an alarmist, I have to say that this trend of attempting to sustain the unsustainable has gone on longer than I had previously thought possible.

I am fairly sure that the next crisis will bring these things to a head and some sort of resolution. But therein also lies great danger. Philosophies that have grown time can have deep roots, and when faced with what to them is an intolerable change, can react somewhat excessively. They may even welcome the opportunity to act excessively and decisively, at least in their own minds, as the path to winning.

When a ruling subculture that has become accustomed to crushing and liquidating things for its own power and pleasure, whether it is natural resources, the environment, crops, animals, land, or social organizations, eventually runs out of things, it can become frustrated and angry in its seeming impotence to continue on, to keep expanding.

Indirectly and somewhat benignly at first, but with a growing efficiency and determination over time, it will begin with the weak and the defenseless, attacking and objectifying them, even in the most petty of ways and impositions. It will turn to its critics, and then everyone who is defined by them as 'the other.'

That is when a predatory social and economic philosophy can turn into pure fascism, and start liquidating people.  And finally it liquidates and consumes itself.

But really, no one wakes up one morning and suddenly decides, 'Today I will become a monster, and wantonly kill innocent women and children.'

Otherwise ordinary people get to that point slowly, one convenient rationalization for their 'necessary and expedient' behavior at a time. After all, they are the good people, they are the strong, they are the most successful and the favored.

 They are the entitled, and not these others who would seek to drain them, drag them back down. They are the champions of progress and achievement and civilisation, the hardest working, and the epitome of mankind.  

What could possibly go wrong? 

"He prompts you what to say, and then listens to you, and praises you, and encourages you. He bids you mount aloft. He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J. H. Newman, The AntiChrist

If you are one who thinks that the above 'could not possibly happen here,' and I am sure that there are many, you may wish to read the following vignette from modern US history. Alan Nasser, FDR's Response to the Plot to Overthrow Him

There Can Be No Bubble in China and the Madness of the Nobility

Just now on Bloomberg Television Peter Levene, the former Lord Mayor of London and distinguished chairman of Lloyds of London, said that there is no bubble in China because "China is so big, their domestic markets are so big, you cannot have bubbles there."

A sincere interpretation of the theoretical underpinnings of this statement would be that the potential demand in China is so great, there can be no possible bubbles there because they are incapable of excess. Interesting theory. Perhaps the US relief effort in the Caribbean is on the right track but insufficient. They can ship their excess and foreclosed housing for the poor souls there. Think of the demand gap that exists between sub-Saharan Africa and Europe. Well perhaps not.

My God, could this be a variant of Efficient Markets Theory? Or a cousin of Too Big To Fail? Apparently the logic in 'The bigger they come the harder they fall" has been repealed.

Of course China is in a financial bubble. It has been caused by years of pegging their currency at an artificially low rate to stimulate exports, multiplied by a state banking system that acted with command and control subsidies. And of course the US can been exporting monetary inflation for years through its dollar reserve currency. Someone had to absorb it.

But it is what China does next, how they react to the bubble, how they manage the consequences of their financial engineeering, that matters. The US has been in several bubbles of late, and is handling them rather badly, as a result of their tolerance for Mad Hatters like Larry, Tim, and Ben in key policy positions.

To be fair, Chairman Greenspan came out with his own howlers of this caliber, and was accepted by many intelligent people in the States for years. In fact, a whole industry was based on ideas and falsified evidence about the impossibility of a housing bubble in the US that in retrospect seems like barking madness.

Come to think of it, both of these fine men are nobility, KBE, Knights of the British Empire. Perhaps it is something deleterious, or even contagious, that occurs when one is subsumed into nobility? Caligulitis? Did the Queen give them a concussion in the ceremony?

I suspect Lloyds is exposed rather badly to China, and m'Lord is talking his book. What is Greenspan's excuse? Whose book was he talking?

This is why the banks and financial organizations must be retrained, because they seem to be peopled by an ersatz nobility that is disposed to spectacular flights of self-serving fantasy. Come to think of it, there is room in the asylum for the government as well.

The US needs a political system that is not so amenable to soft bribery in campaign contributions, and the world needs a reserve currency that is not controlled by the Anglo-American banks. Control the currency, control the world.

And as for the bubbles that keep taking down the developing nations, well, here is their mother.







When these trends break, and they will as all Ponzi schemes do, it will be notable.