THE WOLF STREET REPORT: Market Manias Galore, But Long-Term Interest Rates Smell a Rat

These manias and the rising long-term yields are on collision course. (You can also download THE WOLF STREET REPORT wherever you get your podcasts).

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  185 comments for “THE WOLF STREET REPORT: Market Manias Galore, But Long-Term Interest Rates Smell a Rat

  1. Old school says:

    Excellent Report? As someone smarter than me said, “What happens when the Fed manipulates the price of risk for 20 years?”. We will find out shortly.

    I did have the evil thought that the free money to the plebs was so they would have cash to purchase the assets at the top so the smart money could exit.

    • Mike says:

      Just to clarify, they paid for the 69 million dollar pdf in etherium. I

      NY times heading if anyone is interested

      The $69 Million Beeple NFT Was Bought With Cryptocurrency

      • nick kelly says:

        In ‘Boomerang’ by Michael Lewis he describes the way Iceland’s very dubious assets were bid to the moon by people buying stuff from each other.

        ‘Suppose you have a dog and I have a cat. I sell you the cat for a billion $ and you sell me the dog for a billion $. Now we each have assets worth a billion $.’

        The corporate ‘all stock’ transactions are similar.
        ‘Value’ appears with no cash.

        In five years Iceland’s ‘assets’ rose about 100 times. And then all three of its banks went bust.

      • Trinacria says:

        just like in old Russia: people pretended to work and the government pretended to pay them !

    • Winston says:

      “free money to the plebs”

      $1.9 trillion “COVID” national credit card bill/127 million recipients of $1,400 national credit card cash withdrawals = $11,046.51. So, each prole gets $1,400 of his own money from new debt for which he is liable and others get $9,646.51… from new debt for which he is liable.

      • tom says:

        there wont be any of this shit in 10 years i sleep happy

      • Trinacria says:

        On Friday my wife and I received the $2800 total stimulus (really a sedative) deposited directly to our credit union account. Today, we took that money along with the $1200 we got in late December and the $2400 from April – none of which has been spent….yes, I know quite “un-American” of us – and we deposited it all ($6400) into our family HSA (Health Savings Account) at the same credit union. This will count as an additional “above the AGI line” tax deduction when we complete our 2020 tax return shortly and, will reduce our combined (Fed and State) tax refund by almost $2,000. How’s that for double and maybe even triple “stimulation” ?!?!
        We then decided to “share the wealth” and sent $500 as a donation to two local charities that do a great job with food bank and homeless. So that’s our story.

        • VintageVNvet says:

          Send some to Wolf Trin!!
          He deserves it, for sure, for the work he does for us, especially for us to be able to learn about the stuff usually hidden from us.
          I used to think all these Fed and Treasury folks were just plain incompetent, but have changed my mind and now think they do what they do as secretly as possible, from all but their buddy buddies who make the deals based on that secret information and then feed some of the profits back in the form of ”speaking fees,” campaign contributions, etc., etc.
          Having been well tutored in the 1950-60 era by experienced investors, mostly on the fundamental and dividend side, I was ”fed up” with the obvious manipulations going on, and got out of the SM in the 1980s, and have only been in the RE mkt since.
          Now these crony corrupt folks are ruining that market too, but since I am set for the few years I have left, they can go to heck, and hopefully in as straight a line as possible.

    • K says:

      One of the many debt bubbles that will explode is the corporate debt, $10.5 TRILLION debt bubble. The corporations are often now just making payments on their bonds’ interest owed and rolling over their debts.

      Reportedly, 50 companies got their bonds switched to a junk bond rating last year. Now, as we can all see in our shopping, etc., and as shadowstats reports, inflation is substantial and will drive corporate interest rates up sooner or later. I suspect sooner.

      For dozens to hundreds of the companies that issued junk bonds or quasi-junk bonds, which the companies cannot afford to service if interest rates are only a hair higher, the end is near. Inflation will make their debt payments unaffordable to them unless they can raise the prices to their consumers substantially.

      Not all companies can do that. We will see what happens when the banksters’ “Federal” Reserve cartel (which is not publicly owned) eventually raises interest rates in response to inflation. I predict an economic catastrophe, when inflation panics raise interest rates substantially and companies cannot roll over their debts, so they default. Which crash will destroy the whole economy?

      • nick kelly says:

        ‘Approximately 50% of all investment grade bonds trading in the US are rated BBB or Baa. While that percentage drops to 25% for all Canadian corporate bond issuances trading in the US, it still represents a large class.’

        So half of ‘investment grade’ bonds are barely so.
        These ratings remind me of the ‘C’ grade given out when a D or F is not politically desirable, e.g. the gentleman’s ‘C’ routinely given out by Harvard etc. to well- connected slouches whose parents make big contributions to endowment funds.

        If the ratings agencies were honest, about 30% of their income would disappear.

    • raxadian says:

      Rhe government needs to pump money to get the economy going on lockdown but the main reason is because the economy has always worked in the USA, at least since the sixties, by making the nacional USA debt grow.

      When a single country xontrols the most used currency in the world, is easy for that country to abuse that. More so when people has forgot many decades ago that money was supposed to be exchanged for gold.

    • historicus says:

      I think it is always fair to point out how the “rules” and the “restraints” in place are being ignored.

      Let’s start with the limits in our documents now.
      US Constitution:
      Arttcle I, Sect 8 reserves the right to tax and mint to Congress.
      The Fed imposes a tax upon us (inflation) and they digitally mint (M2 up 27% in under a year). The “digital minting” speaks for itself. Violation? The inflation tax thrust upon us results is a “taxation without representation” situation, for the People have nothing to say about what the Fed does. (unelected who dictate yet are insulated from the ill effects of their own policies due to inflation protections in their compensations) Violation?
      Fed Mandates:
      Stable Prices (2nd Mandate)….. they promote and will allow an inflation that at least rips 22% to 28% (2-2.5%) off the Dollar in ten years. At least. Violation?
      Promote Moderate long term interest rates. (3rd Mandate)…..the Fed promotes all time low long term interest rates which are immoderate by definition, and also allow irresponsible debt creation (MMT) that the mandate was designed to PREVENT. Violation?

  2. Anthony A. says:

    Wolf, nice report on how crazy “everything” is getting. That includes the cryptos, the new NFT’s, leverage going nuts, the over hyped stock market, and interest rates. I’m glad I don’t have to worry when “it’s time to get out” before it all blows up.

    • MCH says:

      NFTs rock, it’s a great way to get rich if you happen to be influential or have some way to attach yourself to someone or something famous. Just looked at the guys who burned a Banksy and sold the NFT for 3x the value of the physical.

      Heck, makes me think the Lourve should burn the Mona Lisa, and NFT it, it could solve some major debt problems. May be take a hammer to the Hope Diamond and then NFT that to reduce the national debt, and the added bonus is that you can sell the shattered pieces for money like the half destroyed Banksy and May be the sun of the pieces will be worth more the original.

      It is literally one of the most screwed up thing ever if Dorsey can take his first tweet and sell it for a million. It would be on the same level as newborns preserving their first poop in the hopes that they eventually become famous and can NFT that s*** and parley it into currency.

      • Cas127 says:

        NFT Beanie babies for billionaires.

      • shandy says:

        Absolutely MCH,
        nFT non fungible (coin) perhaps?
        Token, poker chip, millionaire Talley stick…
        NFT Market overview as of 9:32 pm west coast USA time at printing has 13 pages of non-fungible token Crypto currencies listed.
        But whatever I’m not in I look for other uses of the Blockchain that are promising.

        Still I think it interesting but not surprising that this NFT mania is so last year. I’m not going in simply because I am against ponzi.

        I do have a close look at certain blockchains, that is where I believe that a company’s dividend is.

        In retrospect I do not find that this NFT (locked down token) has digital art work written all over it!

        Thirty years ago a certain computer geek starting buying rights to all digital artwork past and present and future.

        His idea (besides owning it all) is to sell blank picture frames. The buyer downloads a Picasso in one room a Rembrandt in the hallway, Roman Nudes , Warhol’s for a week or two.

        Now I’m not talking just some low resolution pixilated crap. These will be realistic beyond belief, extremely secure, and available to anyone who buys the low cost picture frame.

        I wonder how long it will be until I can change the paint color digitally on the outside of a house.
        By that way NFT may find purposes with the electric car charging tokens.

      • YuShan says:

        It’s a really bad sign when most money is made in things that create absolutely zero value.

        • Anthony A. says:

          I lived in Los Angeles in 1984 when the Summer Olympics were held there. The big money piss away frenzy was on Olympic pins.

          My stupid secretary spent $$hundreds$$ (maybe $$thousands$$? as I am not privy to that real number) from street vendors and other *collectors* buying those pins. She was investing for her retirement, I guess.

        • Spencer Bradley Hall says:

          @YuShan

          That’s how CHINA beats the U.S. Laissez-faire capitalism doesn’t eventually work. Monopoly, oligopoly, and duopoly elements are suppressing economic growth.

          We necessarily have regulated capitalism. And the most dominate economic predator in America is the American Banker’s Association.

          Secular stagnation is nothing other than the fact that banks don’t loan out savings. From an accounting point, $15 trillion dollars in bank-held savings is sterilized. An increase in bank CDs adds nothing to GDP.

          Expect more state capitalism “a political system in which the state has control of production and the use of capital”, i.e., prepare for a command economy “an economy in which production, investment, prices, and incomes are determined centrally by a government”.

          I.e., the Government will necessarily engage in credit allocation.

        • MCH says:

          The problem is that capital is not being put to work, or worse, put into stupid work mandated by government decree (China’s system is a little more efficient than the US one because failing those decree could mean family paying for the bullet, whereas in the US, you have arbitration and other legal mechanism in which the offending party gets a tap on the wrist)

          Example, look no further than NASA and its cozy relationship with its contractors, where for decades, nothing got done, until Musk showed up and turned the game upside down. After all, the concept of reusable rocket isn’t new, just look at the DC-X, the capability was there for two decades almost before Musk made it a practical reality. In the interim, NASA was pathetically reliant on the space shuttle which killed astronauts, and then the Russians because somehow they screwed up and had no more manned capabilities.

          Put it another way, NASA was essentially a cesspool of waste being milked by defense contractors for every dollar and delivering very little practical capability, and today, where is ULA in terms of reusable rockets, the same ULA that owned McD which developed the DC-X in the first place? Still nowhere. They really just should shut that business down or sell it off to Bezos, although given the progress at Blue Origin, I doubt there would be much that Bezos would want to buy.

          There are countless other examples of such ridiculous waste that shows just the stupidity of having government sponsored bright ideas that literally kills productivity, high speed rail in CA for example. But I think the reusable rocket example is sufficient.

          I can’t wait to see what happens with this new infrastructure deal that Biden is putting up, and all the little gimmes and items that is sitting in it… sure it will be a brilliant success and money well spent.

        • intosh says:

          @Spencer Bradley Hall

          “That’s how CHINA beats the U.S. Laissez-faire capitalism doesn’t eventually work. Monopoly, oligopoly, and duopoly elements are suppressing economic growth. ”

          Incidentally, I read on the WSJ about the Chinese government reining in on Alibaba/Ant and how that might hinder innovation. This religious belief on laissez-faire capitalism is almost cute.

          Laissez-faire capitalism — is that why the US is world leader in 5G and in renewable energy? Oh wait…

        • VintageVNvet says:

          This re NASA comment by mch:
          Last time I went to a ”pre-bid” conference at KSC, the Contract Administer NASA employee arrived wearing alligator loafers, ”bespoke” clothing that looked like it came from Regent Street, and at least $25K of gold jewelry, not including the Audemars-Piguet $$$$-$$$$$$ wrist watch.
          I told the honest and hard working folks who were my client to ”forget about it already!”, knowing with certainty they did not indulge in bribery.
          They chose to continue anyway, wasted a ton of their hard earned money and their bid was not even acknowledged.

        • MCH says:

          Proper incentivization is how you get leadership position.

          Again, I point to Musk, he had incentives to succeed with EVs, when carbon credits came in, it was a vehicle for making sure EV wasn’t a money sink for Tesla… well, you get the idea. Same for SpaceX, incentive to beat up on an old dinosaur of an industry run by a bunch of bean counters with oversight by bureaucrats.

          As for the reason why 5G is led by China, that’s easy, cause Clinton and Bush didn’t understand that you need proper incentives to keep vital industries in house, they figure profit motive was enough, and it was… to move the entire fiber com industry to China.

          Talk about missing the obvious.

        • intosh says:

          “cause Clinton and Bush didn’t understand that you need proper incentives to keep vital industries in house”

          So this is the government fault too? Because they adopted “laissez-faire”? It’s government’s fault that the private sector in a “free market” didn’t provide an Elon-Musk-figure to “turn the game upside down” in wireless communication and 5G? If the free market can’t see any incentive for 5G, then the free market is the problem.

      • intosh says:

        NFT reminds me of those comments that simply say “First” in a comments section. NFT is just a more expensive way of doing the same thing.

        It’s all about bragging rights; it’s a pissing-contest mostly for the ultra-rich. It has little practical value for commoners.

      • So does whoever owns the NFT own the patent copyright to the item?

    • roddy6667 says:

      it’s time to dig up Charles Mackay and have him write a sequel to
      “Extraordinary Popular Delusions and the Madness of Crowds”.

  3. 2banana says:

    Ludicrous Willies with Magic lines to hype Vigorous inflation as warned by to us Underlings

    Today’s markets in a nutshell.

  4. MonkeyBusiness says:

    If you go to China’s Taobao, you can buy a statue of Trump, sitting cross-legged and with his eyes closed in a Zen position, draped in a robe. The inscription on the statue says: “Make Business Great Again”.

    I am sure pretty soon, there will be a similar statue of J Powell with the inscription “Make Interest Rate Great Again” ;)

    • polecat says:

      Dude! It will be of Obie Wan PowellNObi, hunched over a banksterputer .. terminal-like .. in full dismissive handwave, with “These aren’t the positive interest rates you’re looking for, so go about your way now, and invest with that hive of scum and villainy known as the ‘$treet’ ..” sewn into the lowest hem of his ‘knew used clothes’ ….

  5. Cruiser says:

    The avoid hangovers, stay drunk routine central banks have been pursuing for decades is about to end. They can’t push manipulated rates of interest meaningfully lower hence decades of monetary distortion are about to be wrung from the system…painfully.

    • WES says:

      Well the Russians managed to stay drunk for just over 70 years! Their masters were too afraid of what would happen to them if they cut off 7the vodka supply!

  6. WES says:

    I am still of the opinion that Yellen wants negative interest rates so government borrowing costs will drop in the future.

    She has 2 options.

    Ideally Option 1: Negative interest rates (NIRP) like ECB and BofJ. This enables unlimited future government spending.

    Failing that, Option 2: Negative “real” interest rates. This is where we are now. This will not stop government from trying unlimited future spending.

    The only way to increase spending is for the economy to grow.

    Increasing spending without growing the economy risks hollowing out the economy and turning the entire country into a zombie!

    • MCH says:

      I am sure The treasury would love the idea to borrow at negative interest; here let me borrow a trillion from you and pay you back $995B in twenty years.

      Gives whole new meaning to the skit two tens for a five.

    • Wolf Richter says:

      WES,

      She doesn’t want negative interest rates. They’re terrible for all kinds of reasons. She raised rates when she was Chair at the Fed!

      • WES says:

        Wolfe:

        Well then she is aiming for Option 2!

        Negative “real” interest rates!

        That will still do the job of destroying the value of the US dollar!

        • Wolf Richter says:

          Yes, that’s just about standard practice in the US :-]

        • Joe Bettag says:

          There is also another scenario that may play out here…the 10 year is increasing for fear of future inflation but what happens if all of the destructive policies by the Biden administration causes unemployment to stay higher in what the market is projecting and there is no increase in the velocity of capital which has been needed to create longer term inflation? Later this year, the 10 year would adjusted downward and this would mean short term deflationary pressures. Longer term, inflation is baked into the cake with MMT in play with the Fed buying longer term bonds thus monetizing debt, further devaluing the dollar and inflation is not controlled as what we saw in the late 1970’s.

        • jon says:

          Aren’t the real rates are negative in USA for last few years ?
          The nominal rates minus the real inflation ( not cpi one ) is negative.

      • Joan of Arc says:

        Unlike most of the world’s central banks, the Fed is a central bank owned by its member banks…not by its government. That is one reason they said they would never institute negative interest rates because it is not good for the banking system.

        Bond interest paid by the US Treasury to bonds held on the Fed’s balance sheet is returned to the US Treasury each year. It is the interest paid to other bond holders where the interest paid is lost. It would be better if all the bonds issued by the government were bought by the Fed so that all the interest would then be returned to the US government. The Fed is nothing more than an extension of the US Treasury. During the 1830s, under the Independent Treasury Bill , there was no US central bank and new money was printed directly by the US Treasury interest free.

        I am not against the Fed that was established by Congress in 1913. I just think it is time that all bonds were bought by the Fed so that the US Treasury was in effect just paying all interest minus Fed administrative expenses to itself. That way the US Government would never be indebted to anyone but itself that = essentially no debt.

        • Lisa_Hooker says:

          Yeah, government money worked great in 1834 – for about 18 months. Then economic collapse in 1837 for about 7 years. See the Panic of 1937. Inflation out the wazoo.

      • Spencer Bradley Hall says:

        @Wolf Richter

        The FED typically “follows the market”. But Yellen went against the grain. Then the markets caught up with the cries for higher inflation.

        Thus, N-gDp level targeting (Scott Sumner’s idea) was denigrated in 2018.

        Link in 2017 – Brad Delong’s “Rethink 2%”

        The error in economics is the Keynesian macro-economic persuasion that maintains a commercial bank is a financial intermediary.

        Mal-investment (“impacts resource allocation”), stems from the fact that adding indiscriminate, artificial, exogenous, and infinite money products (QE-Forever), decreases the real-rate of interest, has a negative economic multiplier and reduces the U.S. $’s exchange rate. I.e., it results in stagflation, where inflation accelerates relative to real output.

        Whereas the activation and discharge of $15 trillion of finite, endogenous, and real-investment targeted savings products (near money substitutes), increases the real-rate of interest, produces higher and firmer nominal rates, and has a positive economic multiplier.

        • Old school says:

          I would say it differently. Look at Europe for example. Interest rates were blowing out to in sustainable levels in Greece, Portugal, Italy and Spain because governments had over promised what could be delivered. Euro governing elites including ECB took control of bond markets to buy time and let government correct budget. All it did was allow for the can to be kicked and the problem to grow. You should never allow governments to borrow for free as it destroys the real economy for short term party.

        • Lisa_Hooker says:

          OS – pray tell which Party is the free money Party? Is it the Party that took control in the US in 2021?

      • Keith Bulls says:

        I think Yellen knows just enough to be dangerous, and not a brain cell more..
        And she is told what to think and do.

    • Cas127 says:

      “This enables unlimited future government spending.”

      ZIRP or near ZIRP basically accomplishes the same thing without the danger of the topic (and its fundamental insanity) being brought up (ie, political nirvana).

      The G has essentially implemented a 50% to 100% tax on the interest income of every dollar saver on the planet for about 20 yrs and the entirety of the MSM has been as silent as a lobotomized coma patient.

      Why rock that boat?

      • Lisa_Hooker says:

        Cas, I like that. Never heard it put that way. A 99.95% tax on saver’s interest income. Brilliant.

    • Mark says:

      Was there ever a people whose leaders were as truly their enemies as
      this one?”

      ― Ernest Hemingway, For Whom the Bell Tolls

  7. Brian pawlak says:

    why not neg Interest rates? Won’t need to borrow any money, more trillion dollar give away reparation money, coming right up. Stand by Americans.

  8. DR DOOM says:

    The Fed has no choice . Central Banks are passing out money like candy in the western world because of loss of faith in fiat. Ben Bernanke told the world in 2010 that the fiat gusher he un-leashed was temporary and normalization of rates would be soon. It’s been 11 years since he told that whopper and the producers of the world are tired of waiting and are balking at stuffing their production down the American gullet for its non-productive fiat debt. We have had a free ride but it’s coming to an end. If you wanna ride it’s gonna be ass,cash or grass.

    • polecat says:

      Well DR DOOM,
      ‘We’ however .. those of us who’ve managed to un-matix to whatever degree, can choose to not play .. allowing chaos & hubris to phase-change to some NEW equilibrium, however that pans out. Change is as certain as the stiff hairs on my neck!

      Manx* YOUR Provisions!

      *where x is the next unknown’ …. well why not, every OTHER group/tribe/class is accreting to this wounderously slippery identi(fire) ‘;] …

  9. timbers says:

    I say…Fed raise rates to 3% tomorrow…as in Monday, and use the proceeds to build Apple manufacturing plants in Alabama, Tennessee, Texas, North Dakota, Fly over country…and force Apple to shut it’s factories in Asia.

    If they don’t? Easy…ban them from trading in any way in USD. You know, like we do to Iran, Venezuela, Russia, North Korea….etc etc etc etc etc

    Please don’t say it can’t be done when it’s been done a thousand times over and over again.

    See how easy that is?

    Then, stand back and watch American manufacturing jobs soar (I hope).

    • MonkeyBusiness says:

      Apple does not have factories in Asia. They use contract manufacturers like FoxConn (a Taiwanese company).

      Speaking of Foxconn, they were supposed to start manufacturing LCD display panels in the state of Wisconsin but in January 2019, they said they were reconsidering “citing high labor costs in the United States”. In February 2019, Bloomberg News reported that the plant was “unlikely to ever employ 13,000 workers.”

      It’s now 2021, and so far …. nothing.

      Manufacturing jobs will return to the United States, but only after the US has officially become a third world country.

      See how easy that is.

      • Harrold says:

        Foxconn sure conned Wisconsin out of $ billions.

      • Lisa_Hooker says:

        MB – or we can wait until the pay scales in the entire 3rd world come up to parity with the US. ;-(

    • nodecentrepublicansleft says:

      You seem to have forgot the last President brought back all those jobs! Remember? He was going to reverse the forces of globalization!

      So much winning folks, you’ll get tired of winning!!

      • tom19 says:

        I have alot of pipefitter friends loving the current one.
        I told them they have to get with the times and Weld From Home.

        • Spencer Bradley Hall says:

          The difference in catallactics, is targeted real investment (which increase the demand for labor and materials) vs. financial investment (the transfer of title to existing goods, properties, or claims thereto). Financial investment draws off a net volume of funds that would otherwise have been spent on current output.

          As Dr. Lacy Hunt said “QE caused the corporate executives to switch funds from real capital investments into financial investments through the paying of higher dividends, buying shares of their own companies, and buying back their shares from others. While this type of action does produce a higher stock market; it doesn’t generate a higher standard of living.”

      • jon says:

        No a trump fan but he at least has the balls to stand up to Chinese thefts and mal practices. Talked about bringing jobs back and jobs for americans.

    • Spencer Bradley Hall says:

      @timbers

      On point. Targeted real investment of funds.

      • polecat says:

        Yeah, but this is EXACTLY why ConGrease .. in it’s current Corpserate supplicationally folded prion-like configuration, WILL • NOT • CHANGE it’s vile & dishonest ways!!!

        Too much of that green cheddar to loose.

        So their legislativey induced 30year+ ‘CONTAGION continues, unabated!

  10. Lawefa says:

    You are right Wolf…its pretty much all a disaster right now.

    • shandy says:

      The thought of being a discussion board armchair banker day in and
      day out isn’t that appealing to me.
      But, how to pull one over on them perks my interest.

  11. Mark says:

    If everything is overpriced, where does one put their money?

    • Kenny Logouts says:

      “The only winning move is not to play”

      – Wargames – 1983

      Even digital cash, or cash in hand might be a less than ideal move.

      Assets that you can find that are of value to you for specific reasons, despite their current high price, are probably the best bet.
      Ie, equipment to do a job. Or a property you want to live in for 20+ years. Etc.

    • cocomaan says:

      Be wary of the doom train. People also insisted that there would be runaway inflation, stock market crashes, and awful things after 2008. Turned into a huge bull run.

      CPI and jobs data might be manipulated, but be careful in a bet against the house, it always wins.

      • Spencer Bradley Hall says:

        The Covid-19 stimulus package is in a monetary flows’ “sweet spot”, where real output gains increase relative to the inflation generated. If AD remains elevated long enough, corporations will increase CAPEX.

        The FOMC’s monetary policy objectives should be formulated in terms of desired rates-of-change, roc’s, in monetary flows, volume times transaction’s velocity, relative to roc’s in the real-output of final goods and services -> R-gDp.

        Roc’s in N-gDp, or nominal P*Y, can serve as a proxy figure for roc’s in all physical transactions P*T in American Yale Professor Irving Fisher’s truistic: “equation of exchange”. Roc’s in R-gDp have to be used, of course, as a policy standard.

      • Russell says:

        Well said. I lost my tail waiting for the double-dip.

      • RightNYer says:

        There has been runaway inflation. Where have you been?

    • Old school says:

      I think the big things to remember are the basics. What is your time horizon? What are future real cash flows on investments? What is your drawdown rate in retirement?

      Current setup to me is stocks, bonds and cash all have negative real returns for my time horizon which is 20 years. If government runs inflation hot only makes calculation worse. If you want to look at it from perspective assets are there to draw on then you have got to match up duration best you can which means stocks are going to be very small component. Anyway that’s looking at it from asset side sell down perspective.

      If you look at it from income side you could try to put together basket of blue chip dividend players and try to construct a portfolio of 3% blue chip dividend income realizing that asset value might swing widely and you will ride it out off of the dividend income no matter what happens.

      Either method should allow you to live on about 3% of current portfolio. Assets can’t pay you twice as Grantham says. They have paid you by being inflated now so income from them is going to be low in the future. Main thing is have a plan and don’t make big investment mistake.

      • gorbachev says:

        For me
        real estate-one house is good enough
        Some cash for a short term needs -one year worth
        Investment-dividend paying co with less than a 60% payout ratio
        Job-social security is a fine replacement if you’re retired.

        That should do it.

      • IdahoPotato says:

        “If you look at it from income side you could try to put together basket of blue chip dividend players and try to construct a portfolio of 3% blue chip dividend income realizing that asset value might swing widely and you will ride it out off of the dividend income no matter what happens.”

        Correct. I am amused by all the “Doomsday is here. Load up on gold.” posts here. A stock market is a market of stocks.

        Putting together a 3% dividend income portfolio with 7% dividend growth is not that hard right now. (For instance, a Utilities Index ETF yielding 3.17% with a one-year dividend growth rate of 9% is a conservative way to beat CDs right now).

        Making an effort to understand what sections of the market are fairly/under-valued is not that hard. I guess buying silver coins and monitoring interest rates daily is a lot more fun.

        I buy income-generating stocks like clockwork every month. There is always something on sale.

      • Jeff T says:

        Do sperm banks still pay donors?

        • Dan Romig says:

          Yes. But it helps to win a few races first. The Kentucky Derby is a good one to have on the resume.

          Many years ago I got to see Secretariat when he was about ten years old. That man got paid well, and a more majestic looking machine of speed & power I have not seen to this day.

        • Jeff T says:

          Good one Dan Romig.

    • Cas127 says:

      In another “money”.

      (Cash/Yuan/Precious Metals/AltCoin/Etc).

      Start small to learn and always heavily diversify.

  12. Depth Charge says:

    Elon Musk should be in prison. Just today he was pumping Dogecoin again, imploring Coinbase to list it. How much Dogecoin does he own? This is a clown who used company funds to speculate in Bitcoin, after he negatively tweeted about it before hand, seemingly to drive the price down so he could buy, and then after he bought it he took to Twitter to pump it up. This is the richest man in the world, at the time at least.

    If politicians, the SEC and the justice department were serious about doing the right thing, and making an example of somebody while handing out equal justice for the wealthy as well as the poor, they’d haul this carnival barking scvmbag off to jail. The world has seen enough of this narcissistic a-hole and his schemes.

    • historicus says:

      Depth…
      What is the phone number to call for the deals Musk gets from the government and states like NY?
      Carbon Credits ….. etc?

    • Old school says:

      I don’t think people like Musk get in trouble very often til their scheme blows up. The bubble phase is good for everyone including politicians. Once the losses occur people get interested in retribution.

      You could also ask yourself the question is Musk a bigger shyster than than J. Powell? They are both in the confidence game.

    • MCH says:

      Before Elon goes to prison, there is a long list of others, starting with the CEOs of most of the major banks, tech companies, not to mention asshole politicians, etc that need to go first.

      In terms of value, at the very least, Elon is delivering via Tesla and SpaceX real world hardware, as oppose to financially engineered and “disruptive” products that screw everyone over.

      If we really get to a point where we take every word out of Twitter seriously, then this country is doomed.

      Think about it, if he is really selling this crap, and people buys it,l because of the name, then the problem isn’t Elon, it’s the uneducated masses who are stupid enough to get suckered in.

    • intosh says:

      “making an example of somebody while handing out equal justice for the wealthy as well as the poor, they’d haul this carnival barking scvmbag off to jail.”

      EM’s followers are more rabid than even Trump’s. So, if you want an incident worse than the Capitol riot, locking up EM is your ticket.

    • RightNYer says:

      Musk is a stoner sociopath who is known to be abusive to people around him.

      • MCH says:

        Yeah, so was Jobs, and he is celebrated as a genius. History is written by the winner and his acolytes.

        • RightNYer says:

          I lost any respect I had for Jobs when, being one of the lucky few to get his pancreatic cancer diagnosed early (for most people, it isn’t diagnosed until it’s already metastasized and is too late) and instead of getting modern treatment, he went on some self-actualization journey in the Himalayas.

        • Mark says:

          re Steve Jobs- ( the history written by mega-winners is rarely accurate)

          Cedars Sinai chimes in :
          “What cancers are associated with AIDS?
          The general term for these cancers is “HIV-associated cancers.” Three of these cancers are known as “acquired immunodeficiency syndrome (AIDs)-defining cancers” or “AIDS-defining malignancies”: Kaposi sarcoma ……”

      • Cas127 says:

        Perhaps.

        But did he ever try to leverage life or death vaccine access in an effort to save his long political career as governor?

        In the sociopathy sweepstakes, there are plenty of CEOs…but my money is on the political class for depth and breadth – perpetually cloaking personal self interest in claims of “public service”.

        My guess is that you are no fan of Cuomo, either, RightNYer.

        I only brought it up because true sociopathy is usually accompanied by the most public displays of sanctimony (see…politicians).

  13. twinkytwonk says:

    My dad used to have two favourite phrases that he constantly told me throughout my life. These phrases were:

    “a fool and his money are soon parted”

    ” if it is too good to be true it usually is”

    Now i don’t understand everything on this site but i think we all know what will happen next but as someone who doesn’t want anything to do with this bs i have to say that it is having a negative impact on my life as i’m sure it is the majority of people.

    • Missouri Jon says:

      Will Rogers stated a version of your dad’s favorite proverb to fit 20th century America:

      “A fool and his money are soon elected.”

      Thanks to Wolf’s site, I’ve had the confidence to warn and explain to others about the wild and *unprecedented* mispricing of risk and misconception of value in the markets over the last four years.
      Every bailout and con job the government pulls unfortunately only convinces the skeptics that I am a scaredy cat doom-and-gloomer – like my uncle, a very kind, fiscally conservative but naive guy who was sold on the notion to “buy and hold stocks because the US markets can only go up long-term”. He’s 80 and I don’t want to see him hurt, but what can you do? His financial advisor is the “expert” and I am just the nephew who does amateur economic research.

      • RightNYer says:

        Buy and hold stocks made sense when the economy was growing, and company profits would too. Not, the economy is not growing, profits at some of our megacaps like Apple have been flat for 5 years, and nearly all stock appreciation is multiple expansion.

        A much different scenario than what we had before.

      • Cas127 says:

        “He’s 80 and I don’t want to see him hurt, but what can you do?”

        Print out the following three pages (only most recent 20 years really needed)

        https://www.multpl.com/s-p-500-historical-prices/table/by-year

        https://www.multpl.com/s-p-500-pe-ratio/table/by-year

        https://www.multpl.com/10-year-treasury-rate/table/by-year

        Then take a lined sheet of paper and make three columns from the data above (make sure to match up identical years for each column)

        More or less what you will find is that as interest rates are lowered, PE ratios expand (to absurd levels over the last 20 years, in line with absurdly gutted interest rates) and stock prices shoot up.

        But as the Government chooses to/is forced to raise interest rates, P/E ratios fall/collapse, driving share prices down (sometimes taking years to recover).

        Present the single lined page, clearly labelled (with supporting print outs) to your Uncle.

        Let him study and absorb it.

        Then, if need be, have him take it to his “advisor” (read salesman) and ask questions about the direct linkage between interest rates, PE ratios, and stock prices.

        And ask about what interest rates have done as the US’ debt-to-GDP has *risen*/become more risky.

        That is about as simple and broker bullshit proof as you can get.

        The interest rate/PE correlation may not be absolutely perfect from month to month (that data is available at multpl too) but over longer periods it generally holds.

        • Missouri Jon says:

          Thanks Cas, your comments often have not just sentiment but real info, which is why I value them highly (and this site).

  14. YuShan says:

    Just think about it… crypto currencies are at current market value are now worth $1.8T. By comparison, the total US gold reserve (8133 tonnes) at current prices is worth $451 billion.

    • Brant Lee says:

      The US could spend this 1.9 tril (free printed money) on gold and silver, corner the physical markets for good. Then set their own price (50k?).

      The US wouldn’t have to back their currency, just be the worlds controlling owner of precious metal. Would you rather another nation (China, their goal) was?

    • MonkeyBusiness says:

      Who know if the reserve is still there?

      For all we know it’s all in Saudi Arabia.

    • Cas127 says:

      What is private aggregate net worth in the US? Worldwide?

      For the US alone, about $130 trillion. (But it is a very volatile number, for the same reason market caps are…tons of marginal pricing scale ups amid oceans of fiat f*ckery pokery)

      https://www.reuters.com/article/us-usa-fed-wealth-idUSKBN2B32H5

      The worldwide equivalent value might be the best yardstick to measure AltCoin penetration against.

  15. YuShan says:

    SPACs and especially NFTs etc really feel like the end phase of a once in a generation bubble.

    Also the crypto space… even if you acknowledge that BTC has merit if it gets widely adopted, last time I checked there were 77(!) other cryptos that have a market value of over $1 billion. Most of them you have never heard of and there is a snowball’s chance in hell that they will ever see wide scale adoption.

    As with everything nowadays, it is very much a “winner takes all” thing. If crypto is here to stay, you’ll end up with just one or two cryptos that everybody uses, based on the merits of the specific coin.

    So clearly BTC is the top dog right now because it had the first mover advantage and name recognition. But if a superior crypto comes along, it could be easily abandoned, because it is not backed by anything real, like hard assets or a group with a monopoly on violence (i.e. the government) that has the power to confiscate real assets by means of taxation.

    For that reason, BTC is really just a momentum play imo. There is no reason to stay invested in it if it stops increasing in price and something else looks more attractive. This is very different than for example stocks. It doesn’t matter if other people don’t want them anymore because you still own the same future income streams (just make sure you didn’t pay too much for them!).

    • 𝚁𝚘𝚋𝚎𝚛𝚝 says:

      “SPACs and especially NFTs etc really feel like the end phase of a once in a generation bubble.”

      I’m waiting for the vix to get down to 12 so I can buy some deep OTM puts.

      • Cas127 says:

        Could you elaborate on how you use the Vix to short the market?

        I’ve seen this referenced elsewhere on the internet but since I thought the VIX was a volatility play (not exactly a put) I’m puzzled by the shorting aspect.

        (Perhaps the play simply uses the volatility of implosion as a proxy for a put on the implosion itself).

        But this would seem to be as problematic as any other time defined put…with the G more or less pinning interest rates within tiny bands over very long periods of time…volatility goes dormant for similarly long periods.

        So the VIX play/put dies of time decay, right?

        • UrsaTaurus says:

          People do all sorts of crazy trades in the volatility arena including shorting volatility (read about XIV and the VIX apocalypse of 2018).

          But in this case, I’m guessing Robert isn’t actually playing volatility / VIX at all. He’s just waiting for VIX to get low indicating the price of buying options (call or put) is relatively cheap. When they get cheap, he’ll buy some long out-of-money PUTS on the S&P500 (or another index/stock but VIX specifically measures S&P500 vol). His PUT options would increase in value both from failing stock prices and from the increasing volatility that almost always goes along with it.

  16. historicus says:

    The Fed started as a rescuer … providing liquidity and stability when needed.
    Then they went into controlling every tick, and the “temporary” QE became a matter of routine.
    Now they are fighting the market.
    They just can’t retire.
    All the metaphors apply…
    They paint themselves into a corner and ask for more paint.
    Staying drunk to avoid a hangover
    Or, doping the race horse who wins a few, then suddenly cant get out of its stall.
    Who will, who can halt this merry go round? Politicians thrive off the cheap money and the vote buying give aways. They wont. Only the market, en masse, can halt this arrangement and manipulation.
    And it wont be pretty. But it must be inevitable. Because for every action, there is an equal and opposite reaction.
    A fistful of Harriet Tubmans will get you what, in the year 2024?

    • YuShan says:

      I think that Wolf is right that the Fed secretly tries to let some air out of the bubble by allowing yield to rise a bit. With the emphasis on “SOME”. Because I have no doubt that they will chicken out way before we see 3% on the 10yr Treasury again. I think the market is going to test this very soon.

      • Bobber says:

        They are doing $80B QE per month last time I checked, so I wouldn’t say they are trying to let rates rise. The problem is they have no good choices. The next move could be the Fed’s last, and they’d rather save it for when the bear is very close.

        • YuShan says:

          My take on this is that if they explicitly tighten by reducing QE, this will cause the panic that they want to avoid. But if they just let longer maturity yields rise a bit, with the story that it’s only natural because the economy is improving, this is more ambiguent so less likely to cause a big selloff but still able to let some air out of the bubble (although I don’t see that happening yet).

          On the other hand, I have no doubt that they will chicken out if the S&P500 drops more than 10-15%.

        • RightNYer says:

          Yushan, and of course, the S&P dropping by 10-15% only takes us back to December/January. LOL.

      • Cas127 says:

        The last time we got to 3% in the fall (Fall?) of 18, the SP 500 dropped 20% within 3 months (starting with PE at 25, not 40, like now…).

        At least the Fed is letting some ZIRP addicted rattletraps go BK, but an honest 10 yr with a DC debt to GDP of 100%+ might be 12%…which would cut through debt addicted corporate America like a scythe through the winter wheat.

    • polecat says:

      The ticks will/are falling of the body plebeian – this true .. feeling all satiated-like .. but soon I think, to meet the hubristic hammerhead of protoplasmic ‘disgorgement’.

  17. Giacomo Cambiaso says:

    Am I wrong by guessing the Fed will just soon get into long term yield control as they did with the short term one? Maybe just not yet but otherwise they know all bubbles could just begin blowing up and that’s not what they want, they are maniac about keeping the bubbles going. Would this be so unexpected or is there any reason not to expect this?

  18. modalita says:

    Caught this on your podcast. Loving that format.

  19. modalita says:

    Here is the irony. When folks realize that inflation is running hot this might trigger an additional inflow to cybercurrencies as there are all these dollars looking for a return. The fact that precious metals are getting hammered at a time of uncontrolled printing is surreal, especially since social media absolutely despises silver.

  20. Micheal Engel says:

    1) Every bubble need a backbone.
    2) The backbone must be :
    – in an open space, above any previous high.
    – it must be a sharp decline, not a backing up (BU).
    – it must be short in duration, it cannot be a trading range.
    3) NDX Sept hi/ lo are qualified as a backbone. SPX Sept hi/ lo are not. They are BU above/ below Feb 2020 high.
    4) In the next few weeks NDX might rise to a new all time high, to build up a “crazier” bubble, // or slant higher to a lower high, to the cloud head bump, to LPSY.
    5) If so, NDX will turn around and breach Mar 1 2021 (L) swing point.
    6) NDX will osc around the backbone for several months and possibly form a H&S, or a tapper… whatever.
    7) How does a 300 pounds pig become a sausage : more food !
    8) The farmer put food in his trailer/ truck, connect a ramp, shut the door and drive to the butcher.
    9) The $1,400 stimulus check will induce inflation. But dear Nanny there is a hole in the bucket. Dear Nancy a hole in the bucket. Put some straw…
    10) The US gov want to control the yield curve.
    11) The long duration might invert and the 3Y will be pulled lower by
    gravity with the German NR rates. US gov will be in control of the “crazy” debt.
    12) NDX H&S will send the rats down. Inflation bs.
    13) TX opening is reciprocal to CA & NYS closing.

    • Winston says:

      “The $1,400 stimulus check will induce inflation.”

      There is already plenty of inflation in things that the CPI doesn’t measure or very incorrectly measures as shown in a recent Wolfstreet column and implied in any discussion of hedonics and substitution, that manipulation primarily caused by the pursuit of lower COLA payments and, to a lesser extent, unjustified political brownie points.

      Worse, as pointed out in the great book, Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve, the manipulators of the world via their artificial control of the price of money then use this kind of grossly manipulated data to determine policy.

      • Harrold says:

        Seems like it wasn’t too long ago that the Fed was worried about deflation and talking negative interest rates.

      • polecat says:

        Who doesn’t like steakflation!?!

        I’m thinking ‘$hark$teak$’ will become what’s for dinner, don’t you?p

        … or, barring that .. then $harkfinancial $oup!

    • kitten lopez says:

      you’re BAAAAACK! yay!
      x

  21. polistra says:

    A magnificent report as always.

    Why hasn’t anyone sued the NFT vendors on the basis of copyright? The whole point of copyright was to prevent cheaters from gaining huge value without paying the author or artist. This is a new form of cheating, but basically it’s just art forgery.

    • Petunia says:

      Generally, when you buy a piece of unique art it is implied you own the rights to the image. What I hear NFTs are aiming for, is maintaining a royalty interest in the art in perpetuity. Any artist or owner registering a piece will be entitled to a portion of the revenue from it’s sale, on every sale in perpetuity.

      You can bet this is where tokenization will take the ownership of every asset. This is what they meant when they say you will never own anything. The tokenizers will keep an interest in every property tokenized. Eventually nobody will own anything in its entirety. The squid will have a tentacle in everybody.

      • Old school says:

        The thing that strikes me is how many of the new hot assets don’t have income. To me this is a key sign to bubble economics. At the crash end of the cycle only incoming producing assets are important as no buyers can be found for speculative assets.

      • Wolf Richter says:

        These are digital works, such as videos and pdf files or tweets from long ago that anyone can see and download and copy and share for free. The NFT has already sold. So who would be paying the royalty? I mean, it’s great to make a donation to the artist, but if you can see the PDF for free, you’re not going to pay a royalty.

        • Petunia says:

          If and when the file gets transferred to a new owner a part of the proceeds would flow to the owner/s of the royalty rights for the piece. I understood the royalty to be a separate part of the ownership rights, like they do in mining and oil drilling.

          Also don’t underestimate the ability to track the usage of images across the web, they will have embedded markers and even software to track them.

        • sunny129 says:

          Latest bulletin on NFT:

          Elon Musk Sells Techno Song About NFTs — As An NFT
          zh

      • Hernando says:

        prtsc button still works, even on a pdf

      • intosh says:

        NFT is essentially simply a contract. So it really depends on what the creator of the underlying digital asset is selling. The creator may be selling, throught the NFT, the right for the buyer to claim that he owns the “original”, or the “first copy”. The NFT owner may also be entitled to perks and privileges, such as exclusive access to future work or events, or whatever. But the creator may choose to retain the rights to the work and often, they do.

  22. Micheal Engel says:

    The 100Y (almost) bull market. :
    1) Leg #1 : 1932 to 1966. // 1966 was the DOW backbone.
    2) Leg #2 : TR between 1966 and 1982.
    3) Leg #3 : 1982 to 2000. // 1998 is the backbone.
    4) Leg #4 : TR from 2000 to 2009.
    5) Leg #5 : 2000 on….// Oct 2011 to May 2015 is Leg 3of3. // Feb/ Mar 2020 is leg #5 backbone.
    6) Option : a correction to the 100Y bull market may be coming. Probably to Leg #4.
    7) But which Leg #4 ?

    • Petunia says:

      ME,

      You are assuming all the craziness has a correlation to the recent past, when things were still valued on some level of reasonableness based on productive activity. The distortions from the GFC and Covid make any reasonable analysis of productivity impossible. Valuations are based on speculation and the mania occurring in any given market. It’s 1920’s America and Germany, and likely the same outcome.

      • RightNYer says:

        Hopefully, it doesn’t lead to a collapse that results in a man like Hitler coming to power.

        • VintageVNvet says:

          From what I read rnyr, lots of folks think that has already happened,,, and most of those same folks think we are over that phase and moving on,,, either ahead or back, take your pick…
          What we can hope is that sooner and later, more and more folks will actually take the time to study candidates for elections at all levels, and not just accept the usually grandiose claims…
          NAH,,, not likely,,, but we can still hope, eh

        • polecat says:

          No. We have instead, the Great White Hollogram.

        • polecat says:

          All Hail the Trans-lucent One!

        • RightNYer says:

          Haha, yeah, well anyone who seriously compares Trump to any genocidal maniac is showing himself to not be a serious person. I would ignore those folks.

        • Lisa_Hooker says:

          Hitler, I don’t think so, Americans don’t have the work ethic needed. Perhaps a Mao, but I don’t think Americans are that ductile. Most likely is a Lenin/Trotsky followed by a Stalin. America does seem to be on the socialist path.

  23. Micheal Engel says:

    1) 1962 was the DOW backbone.

  24. Micheal Engel says:

    5) Feb hi /Mar lo 2020 are NDX and SPX backbones.But the DOW,
    NYA and US 2000 have no backbone. They aren’t likely to build a bubble.

  25. Kevin says:

    Hey Wolf,

    I’ve always wondered, to what extent are long-term treasury rates manipulated by the Fed’s purchasing programs? Is there any way to know what rates would be without these programs?

    Could the Fed ever control long-term rates completely? I’ve heard somewhere that this has been tried in Japan, and now their bond markets have no liquidity. Could you explain this dynamic sometime?

    Thanks!

    • Wolf Richter says:

      Kvein,
      The Fed has been buying Treasury securities of all maturities, roughly in the proportion that they’re represented in the market. So it has been buying short-term Treasuries and long-term Treasuries. This is exerting downward pressure on long-term yields, but the upward pressure from other sources has been stronger in recent months.

      Anyone can guesstimate how high long-term yields would be without QE, but since these are market moves, there is no real way to calculate it.

      The Fed could switch to “yield curve control,” which is what Japan is now doing, and what the Fed had pioneered during WW2, maintained for a while, and abandoned when inflation hit something like 17%.

      Yield curve control means that the Fed announces a rate for the various maturities it plans to target, for example for the 10-year yield = 1%, and then its buys or sells 10-year maturities to maintain the yield at 1%. The Fed has discussed doing yield curve control last fall but decided to stay away from it.

      • Kevin says:

        Thank you, sir, for the info. Your blog is great!

      • RightNYer says:

        So it sounds like based on this description, that yield curve control is no different than regular QE. The only real difference is that instead of buying bonds and seeing where rates end up, you decide where you want rates to end up and buy that amount of bonds.

        • Wolf Richter says:

          Yes. It’s QE that specifically targets long-term rates.

          But rather than saying, “we’re going to buy $80 billion a month in Treasuries,” they would say, “our target rate for the 10-year yield is 1%, and we will be buying whatever it takes to keep it there.”

          If the market believes it, they might not have to buy much. If the market challenges the Fed, they’d have to buy everything in sight till the market cries uncle.

    • Swamp Creature says:

      I thought the Fed had little control over long term rates. If they start buying them like gangbusters that will just fuel inflation fears and cause more investors in this sector to unload to their positions, thus defeating the very thing the Fed is trying to do.

  26. Crush the Peasants! says:

    If the inflating balloon appears to be too large, just enlarge the scale of the measuring tool. Of course, other things become relatively smaller, too.

    • Hernando says:

      I understand now. If there is a market correction the fed will give a lot more money to the banks and lower interest rates. They will give a little money to those who make less than a certain threshold.

      They will punish saver who do not properly lubricate commercial exchange.

      The federal government will also consider anyone with views that are in any way critical to any segment of the population( including cannabis vendors with billboards) as illegitimate-citizens because they stand in the way of large lenders marketing to any given microsegment of society.

      Today’s brave new world, no morals, no saving, just spending at all cost.

  27. Ron says:

    Wolf haven’t commented on your short in awhile update

    • Old School says:

      Discounting dividends of SP500 plus nominal GDP growth has been a remarkably accurate predictor of long term stock market value. If you do that now then you get long term growth of stock market below current inflation rate, which in my mind makes me think Wolf has very high likelihood of being correct. It’s not 100% sure thing, but I am not sure there is ever a 100% sure thing because of political risk. Wolf will probably be wrong until he is right.

      • Artem says:

        Shiller nominal GNP (10-year rolling average) would be a better predictor since the COVID recession temporarily depressed nominal GNP growth.

        Also, maybe GNP is a bit better since the dollar is a global currency.

    • Wolf Richter says:

      I guess you missed it. I was asked just a few days ago and gave an update. Nothing has changed.

    • Old school says:

      I should say as well even though I agree with Wolf I am just sitting in t-bills and short term treasuries earning zero because shorting breaks one of my investing rules. Same for margin. I have about 4% in international index fund stocks just on a valuation play vs. US stocks as a long term play.

      • sunny129 says:

        ‘shorting breaks one of my investing rules’

        It assumes that P/Es casn expanding further and stocks to go up & Up to infinity! I think NOT!

        I have been in the mkts since ’82 when the 10Y yield was 14% and the inflation around 15%. I profitted immesly from bull mkt of ’82 to 2000. I also escaped the bear mkt of of 2008(GFC) but got whiplashed since ’09 with Fed/CBers easy-peasy money policies!

        We are at inflection point as Wolf has pointed, today! Inflation and long term rates are NOT going to cooperate with Fed, going forward.

        Majority of investors are averse to go against the mkt. Hence the reason that many will lose big during ‘secular’ bear mkts as recorded in mkt history. During GFC S&P lost nearly 60% and Nasdaq during dot com lost nearly 90%

        we are in due for a BEAR mkt of a life time for many. It will be obvious to many ONLY in retrospect!

        Stay tuned!

  28. merly says:

    surely the answer to the impossible $ 69 million sale is that buyer and seller are related probably the same person. no wonder the name is secret. apologies if you said this.

    • Wolf Richter says:

      My suspicion is that over the last week or so of the auction, all the bidders were backed by the same person, the ultimate winner, who is crypto promoter and who has a lot to gain if he can successfully promote cryptos. NFTs are a form of crypto.

      • Artem says:

        Wolf, I think “crypto is a form of NFT” would be more accurate.

      • Artem says:

        NFTs are a hilarious concept in general since it’s the re-incarnation of digital rights management–something the tech community fought so hard to circumvent.

        Oh and the irony is that the blockchain idea is a spin-off of distributed file sharing, ie, torrents created for DRM piracy.

  29. Rosebud says:

    GrandDad, I have a few questions…

    1. where were you when they minted the first Bitcoin?
    …and…
    2. what were you doing when they made art into a currency token?

    Granddaughter,
    1. that was the winter of 2009…I was at the fish plant gutting fish and rendering the offal
    …and…
    2. that was the pandemic, I was baking banana loaf and cubing it by phi.

  30. Drunk Gambler says:

    Bank of America says: ” Delinquencies are back to Pre – Pandemic Level “.
    Along with record low credit card debt.
    Seems like Big RE Crash is not gonna happen after all.

    • Depth Charge says:

      My asz. Forebearances are labeled “performing.” Put that in your pipe and smoke it.

    • Old school says:

      Pretty much ally friends or their adult children have been on the move with real estate since Covid broke out and the government went all in on keeping it going. Buying, selling, major remodeling. A lot of assuming the future is bright. Maybe it is, but doesn’t seem like it to me.

  31. sunny129 says:

    The Root Priblems:

    1 Arteficially reduced the price of capital by CBers = Asset bubbles

    2. Debt can be good or bad. Debt for productive purpose( factories, jobs) is good. Debt for pure consumption, buying buy-back shares has no social redeeming value except for investors and company officials

    3. Love of Deficit spending – Congress and virtually ALL politicians of any stripe!

    4 Assuming ‘wealth’ effect will result in more spending, when nearly 40-50% at the bottom livr from pay chek to next. Now top 10% have 90% of Wall St wealth and income stream!

    5. Taxing Capital gains at different rate than earner income. Income stream is gamed towards to those with Capital. Globalization favored the Capital since 2000 and American workers left holding the bag

    Saving was considered good for capital formation until 2000. Fed instituted financialization to benefit the Wall St and financial REPRESSION to punish the savers and the rest of the society.

    They still deny their ROLE in increasing wealth & income inequality!

    6. Easy DEBT (credit) made available in lieu of stagnant wage growth and to maintain ‘standard of living’ since late 80s!

    NOW the piper is at the door, demanding payment!

    Stay Tuned!

  32. Bobber says:

    Last week, I had two friends ask me about Bitcoin, with an eye toward buying. A third friend said he made some good money on Tesla. All of these folks are nonfinancial types – an operations mgr, an electrician, and a salesman.

    To me, this indicates we are nearing a speculative top, where every potential speculator out there has bought in.

    • sunny129 says:

      Bobber

      The topping process will go on, until the day the Fed cannot help but sees the bubble bust, on their watch, just like the last 2 times!

    • jon says:

      Everyone knows we are on big bubble of all kind. The problem is no one know show and when this would all blow up.

      • OutWest says:

        Bobber –

        I was in a pot shop the other day and overheard the cashier and a customer exchange stock market advice. Both in their early 20’s

        Now if that ain’t the sign of a top, what is…

        • RightNYer says:

          LOL. The stoner customer at a pot shop is the new shoe shine boy.

        • VintageVNvet says:

          Exactly correct OW:
          Heard a clerk in the convenience store while waiting in line to pay for gas and a beverage giving out RE advice in 2006 in FL, and told all my friends to get out of mkt as soon as they could.
          Some did and were OK or made good profits.
          Others did not and lost pretty much all of their investments, some even lost their homes/houses they had over mortgaged because of the bubble values.

        • Bobber says:

          Back in 2007, I met two young ladies about age 25 that recently formed a mortgage brokerage. Things were so hot they were making $200k with high school diplomas.

          At the same bar, I saw a group of off-duty police officers having an in-depth discussion. I knew one of them, and so asked what they were talking about. After a little prying, he admitted they were pooling funds to buy another RE property for investment.

          At the top of a bubble, everybody is playing, everybody is a genius.

        • Bobber says:

          Outwest,

          At least these potheads will learn a valuable lesson, during a time when they likely have little money to lose. If it helps them make better financial decisions later in life, they’ll come out way ahead.

          But it is indicative of a bubble, like you said. The people who will get hurt the worst will be those age 50 and above who recently got a bad case of FOMO, after watching the market rise 300-400% since 2009. They may not have time to recover.

    • polecat says:

      Dey all need to shine dem shoes to a high polish, don’t they.

  33. Jezabeel says:

    M2 goes boom. Fed sees no inflation in Netflix price. Bonds don’t listen to CPI. Raising interest rates makes everything go bye bye. Not raising interest rates necessitates M2 expansion. Begin again.

  34. shandy says:

    Someone on the comments thread over at ZH just described nftoken simply enough:
    Do we all realize that the only thing standing in the way of 20% of the homes in your neighborhood going into foreclosure are meme stocks and NFTs? These are the front points of trillions of dollars worth of derivatives. This is absolutely sickening.

  35. fred flintstone says:

    Everyone including me says the stock market is over valued.
    but……what if…..
    The dollar drops in value in spite of higher rates due to ongoing excessive spending by the federal government
    So the old saying that companies can’t raise prices goes out the window since their foreign competition has to raise prices and since a lot of production is overseas
    So domestics can raise prices resulting in a larger than expected bout of inflation.
    So nominal earnings climb not only due to tremendous fiscal stimulus but due to pricing power in spite of higher rates……and this time the housing market and its subsidiary markets participate.
    S&P 500 earnings could reach ??????…….225 per share or more
    235 times 20 is 4700 on the S&P and not even really crazy.
    Who knows!

  36. sunny129 says:

    Elon Musk Sells Techno Song About NFTs — As An NFT

    I wonder for how much’ this’ is going to sold/bought to make more buzz on NFT!?

  37. BenX says:

    What I’ve been witnessing looks to me like speculative insanity – it’s comforting to hear that someone who knows better than I that what I’m seeing is indeed insanity.

    • Bobber says:

      It’s worse than speculative insanity. It’s intelligent people (Wall Street) taking advantage of Average Joe by over-hyping stocks and selling ridiculous financial products. It’s the biggest fraud in history, aided and abetted by central banks that are destroying capitalism and replacing it with cronyism.

      • Lisa_Hooker says:

        Guess I should have become a cronyist when I was younger, but who knew back then.

    • Swamp Creature says:

      I heard Jim (Bear Sterns was a great investment) Cramer on CNBC this morning telling every lemming that would listen to take their stimulus checks and buy Moderna stock. No one even pushed back on this. This moron keeps pushing his bull sh$t without letup.

  38. RedRaider says:

    What to do when everything is in a bubble?

    The answer is obvious —> GAMBLE!!!

    • Turtle says:

      Yeah, huh? I’m told “cash is a losing proposition” and that I should swap my home purchase savings and emergency fund cash for crypto, tech stocks and SoCal real estate before it’s too late. Because “this time it’s different” and “don’t fight the fed.”

      No, I’d rather sit on dry powder at 0.5% than go nuts in Vegas. Everybody and their Aunt seems to be losing control of themselves right now. To them it’s as if Uncle Sam has become a god and is offering only two choices: get rich quick or be left behind forever. Decide fast!

  39. Ray Dalio is trashing cash, and bonds, and buying non-debt investments? Does that mean investors should be getting out of Tesla (what happens to Katie Woods, ARK?) Like a lot of general advice some points don’t add up. Not all debt is created equally. What if we are at peak money supply, what if money gets scarce? The Fed is not going to print 6 trillion next year and the year after. While they can flood accounts with digital currency, physical currency could shine, just as it did in the first depression. Money in the mattress, an idea whose time has come?

    • Bobber says:

      Well, last time Dalio said “cash is trash”, the stock market went down 40%. At the bottom of that dip, I invested some cash that has since returned over 300% (in less than a year). If Dalio still does not recognize the option value of cash, he is a fool.

    • Depth Charge says:

      He’s just another billionaire, pimping to pad his bottom line. The entire eCONomy is a bunch of billionaires trying to steer people into the garbage that will make said billionaires even more obscenely wealthy than they already are. These guys are narcissistic blankety blanks.

  40. Rick Demma says:

    The US 30 year bond was as high as $183 about 1 year ago, April-2020. Now, it is $155. The 30 year US treasury bond price will hit $135 to 140 in coming months and when things get really bad from all this money printing, fake fed manipulation, it will be $100 maybe even $80-$90.

    A minimum 45% to 50% drop in US 30 year treasury bond prices is inevitable. We have another 30% drop from here at the minimum in the 30 year US treasury bond price.

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