iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
22,016 Blog Posts

There is Currently No Basis For a Market Crash

This racks me with idle thoughts at night, the epheremal notions persists in the back of my mind that all of this excess is not a byproduct of wealth and industry but grift and malfeasance. The new $3.5 trillion BIDEN BUDGET is more evidence of this — the absurd coming true and normalized to condition a new generation of ignorants to accept corruption.

When looking at money printing I am reminded of Einstein’s law of relativity. Whether Einstein was right or not, the idea of being on a train moving fast and an adjacent train traveling just as fast equating to no real movement is important to remember when looking at money printing. The whole world is doing it, not just us. So how could there be a bubble when the rubber balloon is also getting bigger at the same time? It defies physics, granted, and it’s magical thinking to assume we can get away with it. But show me where the pressure is being applied?

Below is the LSTA index for leveraged loans — aka the shittiest loans on the planet. If the market was really worried about credit, you’d see these bonds hit first.

High yield is having a grande old time and no one is scared and nothing is on the horizon, aside from +30% YOY real estate gains and crippled supply chain that threatens to freeze all of Europe this winter. The idea that COVID is over because we’re seeing less COVID cases, but still +200% YOY, is also naive — ahead of winter. There are reasons to be terminally worried about stocks, such as the idea that we’re +40% since Biden got elected. One might muse at that and feel it’s wrong and shouldn’t be and care to revoke said gains, all the way to zero.

More magical thinking.

For now, I’ll leave the longer term forecasting to those who get paid to do it. We can have a dreadful market without calamity, just a drill down into dust due to confidence destruction. We are close to that now. We are one or two big down days away from manifesting a rout in stocks and no one will know why it happened. Confidence is everything and without it the house of cards can collapse on its own, without a reason and without warning. These are the hardest events to predict — because without a fundamental concern people are inclined to hold and add to stocks when they drop. Most people view them as long term instruments and are programmed for reward when holding long enough. Last year at the COVID lows people were down 60% in their portfolios and it came all the way back and much much more.

That is not supposed to happen but it did and we pretend it’s ok because “clown world.”

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17 comments

  1. edge

    From the collective minds of central bankers everywhere come the immortal words “I have not yet begun to print”.
    While that motto could be our undoing it is also possible that stimulus could bring about self-sustaining growth.
    In our lifetimes there may not be a distinction. How many years it could go on, assuming that we can’t stimulate away from the present troubles, is unknown, but could last beyond our lifespans.
    At present I feel certain that stimmies, at least 3t, are on the way with more to come. Any uncertainties will apparantly be overlooked.
    I hear you. Knowing how quickly an economy like this could produce cataclysm is quite distracting. This environment must be manageable since we’ve made it this far but one would have to assume that the margin for error is inching toward something…problematic, and our leaders are merely mistake-prone humans.

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    • soupbone

      Why should we go to work everyday when life is now free? No handouts, there’s been too much already.

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  2. roguewave

    We can avoid problems for decades or days. No one knows.

    Who TF knows if Einstein said this or not:

    “Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.”

    ? Albert Einstein

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    • edge

      From “Men In Black”: “A person is smart, but *people* are STUPID.

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  3. Mr. Cain Thaler

    Well said.

    At this point, I’m not even sure a market crash wouldn’t just lead to higher prices. The problem with crashes is they provide more room for the Fed to act. Equities crashing comes with lower commodity prices and that allows for QE which rapidly gives to higher equity prices.

    At this point the worst thing for stocks isn’t even a market crash. The worst thing for stocks would be a long drawn out bear market where we drift lower a couple percent each week with a few relief rallies interspersed over the course of two years, but where commodity prices generally hold up or inflate.

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    • helen

      I give this scenario a high probability. A year 2000-2003 repeat. if you will

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  4. soupbone

    Liquidity tightens up so they lower interest rates, a bit of pain and deleveraging occurs. A new cycle begins after a while.

    We ain’t cyclical now, so no deleveraging flush-out (healthy) has been enabled. Plus we now find it appropriate to expand central bank balance sheets to insane levels, a new experiment if I understand it correctly.

    This has to be the most inflation-begging corner I’ve seen us in. Cheers.

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    • edge

      As a percentage of national wealth and income the bottom two thirds is far behind the 1950-1970 levels. Since the 1980s there has been a slow economic bleed for them and it began to have a negative impact on GDP almost immediately.
      The upshot of this is that consumption is unable to do its share to drive the economy.
      Sustained inflation is nearly impossible to achieve under these conditions due to the importance of wage inflation and consumer demand.
      A healthy inflation rate has nearly everything to do with the economic health of the lower demographic. What we have now is artificial, government created inflation. It will last only if it can spark economic growth at the bottom.
      To sum up- there will be no desirable rate of inflation until wealth is restored to the consumers who need it most.

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      • soupbone

        The gendre of inflation the fed is or was looking for is a growth inflation, overheating as such. This is not that simplistic due to covid-19 and China. On top of that we have green mandates and no-nuclear mandates showing failures of supply. Anyway, like you I trade what I see and I am preparing for inflation.

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        • edge

          LOL- at present I’m betting big on it! Just because it’s working.
          Disinflation is down the road a bit.

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  5. edge

    No one has mentioned political risk. Things are getting pretty chippy out there- violent social upheaval in the next 1-3 years is looking increasingly likely.
    Don’t take your eyes off of this. Everybody thinks the other side has authoritarian designs and the solution is to install their own all-powerful president (dictator) first. Our chances of getting through this political crisis unscathed are bad and getting worse.

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  6. purdy

    Rewards in the US are handed-out to manipulators and to people who, on average, work less hard and are less intelligent than a person in “commie” China. So while one can argue about which country has the more beneficent manipulators, the win will ultimately go to the productive. So there’ll either be an adjustment in our mindset soon (no discernable sign of this) …or there’ll be an adjustment in world-wide distribution. And history suggests that It may be an uncomfortable adjustment.

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    • edge

      As long as I have my recliner and a bridge to put it under I’ll be fine.

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  7. Mr. Cain Thaler

    Me: *flips open treasury yields and energy / foodstuffs futures*

    “Oh looks like another down week.”

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  8. edge

    Does this help explain the counter moves (chop)?https://www.zerohedge.com/markets/big-trade-hidden-under-surface
    Also, SOXS calls, yes, someone really is crazy enough to sell them, are crazy cheap.

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  9. bob smith

    Zerohedge has gone full bonzo trumpanzee. Haven’t visited the site even for entertainment purposes since Tyler started worshiping one of the dumbest people on the planet.

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