Can Anything Knock Down the Stock Market? The Incredibly Shrinking Credit Card Debt; the New & Used Car Fiasco; and Can the Fed Crack Down on Inflation?

Wolf Richter on “This Week in Money,” at HoweStreet.com, recorded on May 19:

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  182 comments for “Can Anything Knock Down the Stock Market? The Incredibly Shrinking Credit Card Debt; the New & Used Car Fiasco; and Can the Fed Crack Down on Inflation?

  1. J-Pow!!! says:

    HAHAHAHAHAHA!!!!!! I, JAY POWELL, AKA KING MIDAS, HAVE SHOWERED THE MARKETS WITH GOLD!!!!!! WE ARE ALL TAKONG A GOLDEN SHOWER!!!!!!! HAHAHAHAHAHAHA!!!! MUHAHAHAHAHAHAHA!!!!!! WE ARE ALL TAKONG GOLDEN SHOWERS TOGETHER!!!!!!! HAHAHAHAHAHA!!!!!

    • Phoenix_Ikki says:

      I love you Weimar Powell, you are my false golden calf idol. The market sure do worship you and your every single words like a prophecy. With you watching over us, please whisper in our ears that sweet siren song market will only go up forever and it’ll only go side way a little bit before another leg up.

      Can we count on you do shoot pass 10T on the balance sheet next time there’s a correction? Cause you know as they say go big or go home.

    • Throop says:

      Can you transfer $1 million to me from one of your RLEs. I have a bunch of lumber I need to buy for my deck and what’s a million bucks to you.

  2. Yort says:

    Wolf- I listen to podcasts at 2x speed, and must say you are very easy to understand at 2x.

    Although Roberts, it sounds like he had 10 cups of coffee at 2x…HA I can keep up, but it makes me laugh as he gets really excited on certain topics and the 2x speed amplifies the voice inflections, etc.

    Anyone else want to listen at faster speeds, click the “settings” gear on youtube, and change the “playback speed”.

    Future blog talks??? – Business input hoarding (inflationary), Fed induced malinvestments (inflationary), govt vote buying stimmy (inflationary), climate changes (inflationary), forward looking consumer sentiment/psychology polls (inflationary)….so many topics, yet so little time for as the psycho-Fed mandates:

    Life, as in inflation, is simply “Transitory” (batteries not included, results may vary from 0 years to 122. years…HA)

  3. Rinaldo says:

    The CBs appear to believe their own BS at the time being.
    They can’t stop QE and can’t allow interest rates to rise much more. If they do, the G7 system will collapse IMHO.

    • Lou Mannheim says:

      Nobody talks about the $30T or so that we’ve printed in the last 20 years. Take that away and we would have had a nasty depression, which would also be in the rear view by now.

      But the stock market must be saved at all costs, because 401(k)s.

      Don’t forget how deflationary tech is. People say it is a second industrial revolution – I say it is the pinnacle of the original. We now have machines that replace both physical and mental labor. But like frogs in a slowly boiling pot of smartphones, we don’t notice the danger.

      • ChuckTurds says:

        Why are smart phones being boiled?

      • andy says:

        The machines.. I’m still waiting for the machine that folds laundry.

        • NBay says:

          Ya could switch to t-shirts……never have to fold them…..just hang them on the bedroom door with the last worn inside out on the corner….then just keep shifting them down….easily holds 15.
          Any extras can be shoved in a drawer with underwear and socks.

      • Matt Heisenberg says:

        Frogs, with smartphones, being boiled. Yikes

      • Brian Dalton says:

        That “nasty depression” is on its way

      • makruger says:

        You can be pretty sure of one thing, and that’s that the value of those 401K’s (along with good paying jobs for that matter) are of little importance to those running the economics in this country. What is important however is keeping borrowing costs low for businesses, well that and I suppose the wealth effect is of great importance too.

        • Lou Mannheim says:

          401(k) balances are, in part, why we keep inflating. The higher the balance, the more you have to lose. How many of those households donate to campaigns/PACs? I bet much more than people with nothing to lose. They also spend more, which would dry up if their future gets cut in half.

  4. historicus says:

    First Inflation will be denied (it’s transitory)….we are leaving that stage
    Next, Inflation will be a sign of a thriving economy…..we are entering that stage
    Finally, the Fed will acknowledge it is running a little too hot, and they will limp in with meaningless ineffective 1/4pt raises well behind the curve.

    The Fed has no appetite to fight any inflation…..and they wont until politicians take up the cause. And for that to happen, the citizenry will have to have been severely punished by rising prices … food and gas and housing. Not until then will it become a cause celeb.

    • Nicko2 says:

      As others have anticipated…..stock market correction in the fall.

    • bungee says:

      food will be the one.
      sadly, the ‘solution’ will be price controls….this has all been done before. maybe this time, if someone wants food they’ll have to get some experimental gene therapy first. actually…that’s exactly what’s going to happen.

    • Jdog says:

      Inflation has been running hot the past few years. Now it is starting to move into double digit territory which is painful. Add to that the massive debts being incurred by the Federal Government that must be serviced by taxes and we have the perfect storm.
      There is now no way out of the corner we are in. Inflation will, if left unchecked, mushroom as it did in the 70’s into and devastate the economy as frontrunning becomes the norm. It will necessitate raising interest rates which will increase the cost of servicing the National Debt, and that will require ever increasing tax rates.
      Add to that, the reality that most State and Local governments are hopelessly upside down on deferred liabilities such as pension obligations and the picture gets truly ugly.
      If people were smart, they would be preparing for the mother of all depressions, and not taking on debt like they had a rich uncle on his death bed….

      • yxd0018 says:

        You may wait several decades until this doomsday arrives. Without timing, the word lost its meaning.

        • Jdog says:

          I do not know where you come up with that from. If you had lived through the last inflation run up, you would know once inflation reaches double digits, front-running becomes the driving force and it accelerates inflation dramatically.
          Front-running is when prices are rising so fast that they must be presumed, and thus built into the system. Companies must assume their costs are going up substantially, and enact regular price increases for their products. Once that begins, the Fed and government lose control of the economy and must take drastic action to regain control.

      • Sub says:

        If we are about to head into an inflationary storm, aren’t the people gorging on debt the ones who will benefit, by paying down their debts with debased currency?

        Seems like once again it will be savers who get screwed.

        • Sub says:

          What I mean is, the government response to high inflation seems more likely to be printing rather than hiking.

    • Brian Dalton says:

      There’s cost-push inflation..now..but true cross sector inflation will be non-existent..one only needs to look at that last 14 years of cheap money ..the Fed’s failed gambit to stave off the next Great Depression..which is on its way

  5. Anthony A. says:

    As a 77 year old with a very ill wife and on a fixed income (SS + some savings), it’s sickening watching inflation eat away at our remaining life. It’s a good thing I worked and saved like a dog to become debt free (no loans, paid off house). But COSTS are going up all around us. The big ones are:

    Property tax – just got the reappraisal – County doubled the land value, improvements increased a few percent. Maybe 10% increase overall.

    Insurance – auto/home is up 10% for this year.

    Medicare and supplemental coverage – Sup. coverage increased for us several percent. Medicare+supplemental ins.+ Part D drug coverage costs us $9 K out of pocket. Wife’s drugs are $4 K out of pocket. (and don’t suggest we switch to a Medicare Advantage plan – picking qualified doctors and having choices is important to us)

    Since I do all the grocery shopping and handle our finances, I see “sneaky” increases almost everywhere (groceries, utilities, services, etc).

    One thing I have noticed…..I have NOT seen any price or cost go down in recent memory.

    Oh, we are way better off than most folks we know who are in our age group.

    • Bert Powers says:

      I agree. I am past retirement age yet continue to work because of these uncertainties. My job is easy and it pays well, so it is a no brainer to continue working. This inflation is real and it hurts everyone in one way or another.

      • Apple says:

        If you Boomers can’t make it, what hope do the young people have?

        • Petunia says:

          They don’t have any hope of doing better as a group. That’s why they play on Robinhood. Once in a while, one of them makes enough to pay off their student loans.

        • Anthony A. says:

          What helped us older folks make it to a situation where we could retire without eating cat food and living in a tent was the OPPORTUNITY to find a job that could become a career and allow us to save with stability over a long period of time. We had manufacturing jobs by the large numbers that paid well even if you were a line type worker. I went to college after the military and became an engineer which opened many doors for me.

          Even during high inflation years, wages rose accordingly and interest rates were high enough for savings to stay with the inflation.

          Now with the U.S. offshoring manufacturing, computer work, etc, this country leaves less OPPORTUNITY for young folks to have a decent, long term career. Plus, companies don’t retain workers as long as the old days and good jobs are less plentiful. Professional services such as lawyers and doctors are probably a better career choice right now if you can get the education.

    • Swamp Creature says:

      Anthony A.

      Same here

      We’re continuing to work past retirement. Enjoy getting out and being productive. This mitigates, financially, the things you mentioned above. But this job, appraising urban RE is so stressful its hard to justify continuing this madness. Nearly every organization you deal with in the Real Estate industry is crooked and incompetent. We’ve cut out standard of living ahead of time. Staycations vs vacations. Cooking at home vs eating out except once a week. 20 year old Toyota. Only buying essential items.

      Its going to get a lot worse. so we’re preparing now. You will look back at these days as the “good times”

      • Anthony A. says:

        SW, I too, worked up until I was 74 to add to savings, and then replaced with a much younger fellow. But now my wife needs me around all day as she is “declining” and pushing a walker. Even if I could try to get another job, most places won’t hire someone my age, although I am physically fit and still have all (well, most) of my marbles.

        Good luck with your job, although stressful, especially now with the RE demands and craziness.

      • Petunia says:

        Swamp,

        Maybe giving them what they want is the way to end this mess. If the willing buyer wants to pay 100% over asking, sounds fine to me, they set the new price level. A fool and his money should be parted.

        • Swamp Creature says:

          We appraisers work for the lenders. Appraisers have professional standards called URAR. Foolish buyers don’t set the market. Comps do. You’re looking for trouble doing what you suggested.

    • Brant Lee says:

      Funny thing is a lot of older people like us would no longer use banks except for want of a better option. Savings are dead weight losing value against inflation. I wish the heck there were a stable safe crypto where you wouldn’t lose savings value and could make your transactions, it’s all I need.

      • YuShan says:

        You could consider putting some of your savings in digitalised allocated gold (see link under my username). It will pay some yield too. In the US you can already use it with a physical debit card for payments. I’m waiting for the debit card rollout in UK/EU (should be this quarter).

        But of course even a stable investment like gold can easily decline in value relative to the US$. When you are old and rely on your savings, your options are very limited because you don’t have time anymore to sit out any declines.

      • Swamp Creature says:

        With this new IRS bill funding 80 billion to audit everyone’s bank account, I’m getting ready to withdraw all my money out of the bank and hold actual cash currency. Why give up all your privacy when the interest return is near zero.

        I’m starting next week taking everything out in 1K increments. They may run out of Ben Franklyn bills before I’m done. Wells Fargo has a button on their ATM’s for 1K withdrawals. I don’t even have to go in the bank to clean it out.

        • Paulo says:

          Swamp,

          They even want to audit people in other countries. We moved away from the states when I was 12. I have never worked for wages down there, but the Govt still considers me to be a US citizen and expects me to file. My assets are in my wife’s name as well, but that has not stopped them from asking CDN banks for statements. They reserve the right to fine people like me and/or hold them in custody for tax avoidance should they decide to do so. I won’t provide a frowned upon link, but the policy is quickly available online.

          It costs thousands of dollars to formally renounce citizenship which my older brothers have done years ago, but I refuse to ever do so. Why should I? I’ve lived here my entire life. Originally, the tax policy was to go after shady types, but the past few years ‘they’ have cast a wide net and Cdn banks have obliged. I don’t believe my Credit Union has done so, nor would they….but the big banks do send information to the IRS. If they don’t provide the info they risk their own ability to do business down south, but the Credit Unions just operate here.

          As the deficits increase I would suspect the policy will be to get money from wherever and whomever.

        • Lisa_Hooker says:

          Paulo, I expect a windfall when the US Congress passes a law that begins taxing Roth IRA withdrawals (if not annual gains). They changed the law and taxed Social Security around 1983 and they can do it now for the Roth “because it’s only fair” or “it’s for the children” or “white privilege” or “we really need the money.”

      • Michael Gorback says:

        Until recently cash was a slow bleed. I consider it the premium on an insurance policy against deflation. If you think there won’t be deflation consider what happens to money supply when people default on huge house loans and car loans, or a commercial loan rolls over at a higher rate.

        I also own precious metals as insurance against inflation. Like cash, it’s been a drag on my portfolio.

        My total return YOY due to these hedges is about half the S&P 500. Do I mind? No. Rule #1 is don’t lose money. And if I do lose on stocks, hopefully the same buffering that held back my gains will hold back my losses too.

        When markets crash it’s a fast bleed and the recovery time is long. If you lose 50% in a market crash you need to make 100% to get back to baseline.

        That’s why in this century although it seems like stocks are red hot, we’ve had two large bear markets that kicked portfolios back into the previous century. Both the dot-com bust and the GFC pushed the market back into the mid to late 90s. As a result this seemingly hot market has had sub-par returns compared to its long term average.

        As far as a stable safe crypto, you might want to explore Defi. It looks amazing and you can accomplish things that usually require a bank or brokerage.

        • Finster says:

          Since 2000, stock appreciation has mostly been a figment of pricing them in a depreciating unit. If you price them in gold, they’re still below their 2000 peak.

        • YuShan says:

          For me, precious metals are not just an inflation hedge but just as much a protection against counterparty risk (provided you are holding them outside the banking system). The threat of defaults, but also simply restrictions how my money you can take out when a crisis hits.

        • cb says:

          Michael Gorbach said: “If you think there won’t be deflation consider what happens to money supply when people default on huge house loans and car loans”
          ————————————–

          What does happen to money supply? It doesn’t shrink. The money was already lent and spent on the house or the car. The money is in the system to stay.

          The fact that the bank has to write off a bad loan does not remove the money from the system. The bank’s loss. The deadbeat’s gain. And the house seller and car seller’s gain.

    • historicus says:

      Anthony A
      “When central planners decide, they intentionally help one group at the expense of another.” Hayek

      And since 2009, interest rates have been under inflation (except late 2018)…
      It is clear who they decided to hurt……people like you (and me).
      Enough!
      In 2009, it was to save the system hurt by massive debt, gunslinging wall streeters……then it became permanent.
      Inflation is a TAX, and only Congress can implement a TAX…not some unelected Fed Chairman.
      Expanding the money supply by 27% in under a year…..minting is also a function of Congress, not some unelected Fed Chairman.
      At least Congress has to answer to voters occasionally….
      Inflation is also theft, for it STEALS the value of past labors (savings) and current labor (wages).
      For the Fed to intentionally promote inflation is to promote INTENTIONAL THEFT!
      For the Fed to intentionally promote inflation is to violate their “stable prices” mandate…..pure and simple.
      Powell is a bank robber in reverse. Where is the outrage?

      • Aaron says:

        “It is common to speak as though, when a Government pays its way by inflation, the people of the country avoid taxation. We have seen that this is not so.  What is raised by printing notes is just as much taken from the public as is a beer-duty or an income-tax. What a Government spends the public pay for….”

        “The owners of small savings suffer quietly, as experience shows, these enormous depredations, when they would have thrown down a Government which had taken from them a fraction of the amount by more deliberate but juster instruments.

        This fact, however, can scarcely justify such an expedient on its merits. Its indirect evils are many. Instead of dividing the burden between all classes of wealth-owners according to a graduated scale, it throws the whole burden on to the owners of fixed-interest bearing stocks, lets off the entrepreneur capitalist and even enriches him, and hits small savings equally with great fortunes. It follows the line of least resistance, and responsibility cannot be brought home to individuals. It is, so to speak, nature’s remedy, which comes into silent operation when the body politic has shrunk from curing itself.”

        JM Keynes, A Tract on Monetary Reform, BN Punblishing, 2008, pp. 62-65

        Same as it has always been throughout history.

        • YuShan says:

          With normal taxation it is transparent who is paying and how much. And the merits of such taxation can then be debated. That is how it should work in a democracy.

          For that reason, stealth taxation by means of inflation should be forbidden. (Of course this will never happen).

      • andy says:

        They did ensure “stable prices” in junk bonds. So there is that.

      • cb says:

        “Funny money” lending is evil.

    • 2banana says:

      QE, since 2008, has robbed savers of trillions.

      The bailed out banks and Wall Street firms love this new normal.

      But you got $1400 in stimulus…

      • josap says:

        Cancun was on sale and we bought a very nice vacation. Induction stoves are on sale, we bought one with all the bells on it including the air-fry oven.

        We have everything we need. Our needs are simple. I think we will be ok as long as we are careful.

    • David Hall says:

      An elderly couple in my community posted their situation in the local community Facebook group. They were going to sell their home and move into a rental as their savings were nearly exhausted. Others may do reverse mortgages as a last resort. Medical bills are the leading cause of personal bankruptcies. At an annual check up my doctor charged $1000 for routine testing. Insurance paid part of the bill. After decades, I switched auto insurance companies and that lowered my car insurance bill. Florida home insurance is high. They may not issue new policies during hurricane season as people might see a storm approaching and try to buy coverage. Many people have seen their homeowner’s insurance cancelled within weeks of the hurricane season that starts in a few days.

      • Apple says:

        As Sam Kinison once said “there wouldn’t be any issues with hurricanes if you’d just move”.

      • Swamp Creature says:

        Right after hurricane Andrew devistated South Fla in 1992 homeowners got their home ins bills tripled and quadrupled. I was down there on TDY and talked to homeowners. Ins companies made a killing on the hurricane.

      • YuShan says:

        I think reverse mortgages are going to be a big thing all across the developed world, simply because that is where most household wealth is concentrated. This resource won’t be left untapped. I also expect broke governments to force people to do this before they get paid any benefits.

        Many millennials currently assume that they are eventually going to inherit their parents boomer wealth. They should think again.

        • Trucker guy says:

          Fear of death combined with modern medicine is an excellent way to bleed off assets retired people have. I’ve seen it personally many times over.

          The parents get old and infirm. Kids work jobs, shove the old into retirement homes that drain any savings by the thousands monthly. The old get many wonderful near death experiences that would have normally done them in and medicine keeps resurrecting them and artificially keeping them alive and usually in pain but they don’t want to give up and die. Medical providers and senior care reap the benefits of housing would be corpses.

          Nobody wants to take the tough road and let death do what it does best. I’ve seen it many times where a person is living in excruciating pain and having organ failure to the tune of tens of thousands a day in care just to extend their life a few more days or weeks if they’re lucky.

          Death isn’t something that is tangible anymore in my opinion. People used to die in their homes and with their family and a broken hip and bad kidneys meant a few weeks left for old timers. Now we have people living on dialysis machines and bed ridden for years even.

          Hope I die quick and painlessly before I get to the typical condition of a 70 year old, shuffling around in misery wondering who is taking me to my next 10 doctor appointments this week and shoveling my money into some nameless pharmaceutical and insurance companies.

        • Anthony A. says:

          Trucker guy: you said……..

          “Hope I die quick and painlessly before I get to the typical condition of a 70 year old, shuffling around in misery……”

          If you take good care of yourself you can put this off for another 15 years beyond 70! That’s what I am hoping for at 77+!

          Good luck!

        • drifterprof says:

          I’m 70 and run 5k (well, jog). Take no meds. No chronic pain issues. Still able to tap the ladies if they want it.

        • NBay says:

          Yep Trucker,
          Watched my mom go thru many years of doctor-hell. But her religion considers any form of suicide a (mortal?…the REAL bad ones) sin, and she believed the docs when they said they could “fix” her. Stuff like an Aortic Valve replacement at age 85!!!! FN Insane.
          Anyway, she cost you all an easy $1M+, just in the last 1 1/2 years plus who knows the expensive drug prices. She was on 7-8 always changing near the end, we had to figure it out for her…but it’s what she wanted.
          Maybe she WAS afraid of dying, even with eternal bliss awaiting her? Anyway, my sister and I sure went through hell with her.

          Guess I’m lucky dieties aren’t of much interest to me. But “modern miracle medicine” is, and I can speak the lingo (except the majority of anatomy) and read/understand the latest on “miracle drugs/cures”)

          Also understand the basic physics/chem of ALL the machines they all use….they are up against they VERY small size resolution wall, and where x-ray xtallography used to be the gold standard, they now claim (using detectors from CERN), they can resolve quaternary protein folding structure with electron microscopy….I think it’s all BS, and the immense profits make it easy for them to ignore that.

        • NBay says:

          Oh yeah, by cost I meant medicare, and she had enough savings to pay for supplemental, not that it matters one bit in the overall scheme, I don’t think, but her savings were drained except for $17K then split 4 ways. At least we kept her at sisters, so no nursing home stuff. Sister took nite shift, I took day shift.

          Added since this is a financial blog and “deadbeat bashing comments” are plentiful….used United Health, there, it’s related to stock topic….:)

    • Depth Charge says:

      “As a 77 year old with a very ill wife and on a fixed income (SS + some savings), it’s sickening watching inflation eat away at our remaining life.

      Property tax – just got the reappraisal – County doubled the land value, improvements increased a few percent. Maybe 10% increase overall.”

      If you think that’s sickening, imagine being a young person with absolutely zero hope of ever even affording a house. I’ve said it before and I’ll say it again, housing bubbles hurt everybody except for the wealthy. It’s a net negative for society. Until people wake up to this fact and stop celebrating the bubbles, look for more pain. The FED needs to be stopped at any and all cost.

      • MCH says:

        You may as well try to stop the sun from rising. The Fed is inevitable…. and it is definitely not transitory.

      • ru82 says:

        I am trying to figure this one out….. “young person with absolutely zero hope”. I know of a couple that work as waiter and waitress just bought a 3bd 1500 sqft $245k home. In addition home ownership is around 64% I think and has been rising since 2011.

        But man it is getting expensive to buy a home. Home ownership probably includes owning a condo.

        So maybe buying a single dethatched home is probably becoming a pipe dream for over 50% of the population but buying a 600sq ft loft is still affordable.

  6. timbers says:

    In an advanced financialized economy such as ours (ex: China is not financialized as we are, hence the finance sector does not control it’s economy the Party does.):

    “Fireworks” = Mr Market hissy fit.

    Mr Market hissy fit = Control of Government.

    Me thinks that will likely be our downfall in the short term (10-20 yrs) vs China.

  7. Say It Aint So says:

    The FED has become master manipulators of the world finance and for the majority of people the impact of inflation is very real. The sad part is the inflation on necessities such as food, gas, and insurances…What can the so called Congress do? Their suggestions are minimal and barely lift anyone from the current situation. Even with lockdowns ending most people will have to cut back although the impact from these cutbacks will be lagging…yes, credit card debt is shrinking but the banks will find other ways to earn their “fees”…and they will try in earnest to control the crypto…just to earn their fees…

    • historicus says:

      Inflation is theft, for it STEALS the value of past labors (savings) and current labor (wages).
      For the Fed to intentionally promote inflation is to promote INTENTIONAL THEFT!
      It’s like bank robbery, in reverse. Powell should be arrested for violating the mandates, the instructions, the agreement under which the Fed is allowed to exist and operate.

      • andy says:

        You live in a banana republic. Act like it.

      • Heinz says:

        As has been said before, inflation and currency debasement is the cruelest tax of all on the populace …

      • Old School says:

        Asset inflation is pulling the illusion of value from the future to the present. Shiller PE is 36 so that is around 2.8% earnings power with dividend yield of around 1.4%. Nobody has to sell at these prices, but it would seem crazy to buy more.

        Just seems like everything looks like a nail to the Fed, so they keep using the hammer. Maybe it’s all more complicated than I know in global financial world and Fed is doing the right thing to keep US top dog for a year at a time.

      • economicminor says:

        Inflation transfers wealth from the producer class to the financial class.. It is robbery by those in power.

        Usually things like this continue until they break the back of the workers.

        Some brag and promote this, like the rise in house prices on Sunday Morning *news* this morning. Some are benefiting while the majority suffer.

        But things don’t matter until they matter and when they matter they will matter a whole lot.. Its the Hunger Games with a lot of armed citizens.

  8. Winston says:

    Inflation they can’t stop without raising rates and crashing the party combined with supply chain problems also causing inflation that WON’T catch up with demand because of production & transportation lead time issues with producers NOT willing to ramp up production dramatically to supply the pent up demand bubble only to have new plant sitting idle afterwards = stagflation.

    Also, a question I’ve asked multiple times here which has gone unanswered: what effect would a higher EFFR have on national debt payments which were $523 BILLION in 2020.

    • Winston says:

      And any ramped up production that does occur will take place in China, not the US.

    • historicus says:

      EFFR? Effective Fed Fund Rate?

      I think you are referring to the tremendous financial burden the debt service would be if rates rise.
      Well, in my view, this is why the debt creation never should have happened and why those who did it are responsible for the dire conditions of today. We screamed and continue to scream of the debt load, but it falls on the deaf ears…..owned by the people who now say we cant raise rates to fight inflation because it would be too expensive.
      When did the Lender become slave to the Borrower? Right around 2009.

      • RightNYer says:

        Yes, it started with the ARRA. That was when Dems decided that it was the job of government to spend our way out of any recession.

        • timbers says:

          Thank goodness the other Team gave us a balanced budget when they left the WH. Because only spending causes deficits. Tax cuts balance budgets especially for the rich and corporations. Everyone knows that.

      • Winston says:

        “EFFR? Effective Fed Fund Rate? I think you are referring to the tremendous financial burden the debt service would be if rates rise.”

        Yup! The answer to my question doesn’t come from any search engine keyword combination I’ve used.

        • Petunia says:

          I think a better question is why the federal funds rate matters at all in connection to the national debt. The answer is that the FFR acts as a signal to the primary dealers as to where the fed expects the treasury bids to be. Some small deviation is permissible for the sake of appearances but staying in the lane is expected. Going outside of the lane, in any defiant way, is financial suicide.

    • Winston says:

      Combine inflation caused by multiple, powerful factors not under the control of The Fed like the pending increased taxation, lingering supply chain issues, energy cost increases, wage increases to draw people away from unemployment benefit supplements which will not be completely ended for political reasons – recent example: “Colorado Offers $1,600 Incentive To Unemployed Residents To Get Back To Work” – due to the overnight shift from brick and mortar stores to the lower labor numbers required by their replacements, like Amazon, causing lasting high unemployment – along with the ILLUSION of real GDP growth due to the inclusion of massive government transfer payments in the GDP calculation and you get stagflation.

      That’s my bet, anyway.

      • Petunia says:

        I’m not positive about this, but I was under the impression, the states had received the Cares Act unemployment funds in advance as a lump sum. If this is the case, then suspending benefits, leaves the states with a load of cash to blow. Does anybody know?

    • Kenny Logouts says:

      If inflation is up, and rates don’t go up, and salaries don’t go up because unemployment is so high, it’ll cause a crash in any case won’t it?

      How can demand stay high?

      Unless gov keep giving money out.

      But that breaks bonds and foreign bond buyers.

      And that forces rates up.

      It’ll be coming down in one way or another now.

      They’ve cornered themselves.

  9. Michael Gorback says:

    I agree with most of the observations. One problem that stands out is there are too many moving parts and few share the same control mechanisms. No central bank or government can stop la Nina. No central bank or government can speed up chip production.

    The second is that the stock market is entirely dependent on Fed actions and the Fed is severely hobbled now. They can’t keep rates down much longer and they don’t want higher rates, but with inflation the traditional approach has been higher rates. It almost makes me want to liquidate all of my bond holdings or at least move to TIPS, but I suspect they’ll tinker with data to screw TIPS owners.

    Toss in the supply disruptions and the severe drought and all I can see is stagflation and possibly starvation. Of course, I’ve been expecting stagflation for over a decade but I never thought they’d push QE so hard and for so long.

    Hard times coming for the economy and probably food shortages. What a great time to defund the police. One possible investment would be private security. Wealthy neighborhoods will hire their own. Back in my old neighborhood in 2008 there were a lot of property crimes and we hired a private security company to patrol 24/7.

    Maybe this was all wrapped up at the end but I fell asleep about 5 minutes before that. Podcasts are just so relaxing.

    • historicus says:

      Michael
      “Hard times coming”…..it will only be “transitory”.
      Like the coming riots in the urban areas will be “mostly peaceful.”

      • Winston says:

        And “transitory” like the currently massively inflated in price, low mortgage rate home which will plummet in credible market price due to being monthly payment unaffordable at higher rates.

        • yxd0018 says:

          If you don’t move , isn’t the monthly payment the same even the rate goes up? The market price will change for sure.

      • Michael Gorback says:

        Historicus,

        There’s an old medical principle that has never been wrong: All bleeding stops.

        There’s an awful lot of wisdom in those three words and quite a bit of irony.

        I just got back from brunch. The place I like to go used to have a prix fixe 4 course menu with bottomless mimosas for $30. This year after they relaxed covid rules and we could do outdoor dining it was $35. Just a few months later and today it was $40 and an extra $5 for champagne to make mimosas.

        Since restaurants can’t find servers due to the stimulus checks our waitress was a clueless young lady that rendered horrible service.

        Well, that bleeding just stopped. I’m not going back.

        • Old School says:

          My.grandson just got a summer job at a small town carwash for $8.00 per hour. He had never washed a car in his life and was hired on the spot 33 hours per week. First day on the job he said someone dropped $100 in the tip jar.

    • Swamp Creature says:

      I think we have an appeal for a mistrial on the George Floyd case coming up soon. Based on what I’ve been reading a mistrial is a real possibility. Imagine what would happen if the verdict was overturned by the appeals court? You are going to need more than private security guards this time around.

      Lock & load is going to be the order of the day.

  10. Aaron says:

    Reform will not come from politicians at the federal level. It is contrary to human nature.

     
    Instead, reform will only come from some other entity with sufficient power. The way forward is to use the so far dormant power of a state, where their resources in a legal issue are necessary.  
     
    The Constitution requires states to tender gold or silver coin in payment of debts.  The US mints those coins, but then the US charges a capital gains tax on those coins.   Obviously, such a tax means those coins will never circulate as money.  

    How upside down is that? Consider this: a dollar is defined in the US Code as an ounce of silver (ref: 31 USC § 5112). Federal reserve notes are neither a dollar nor are they redeemable in dollars or anything else (perhaps they would be effectively redeemable in gold and silver coins without a capital gains tax levied upon those coins). However, there is no capital gains tax levied on federal reserve notes, but there is a tax levied on what is defined by statute as a dollar.
     
    How to rectify this bizarre state of monetary affairs?

    A state brings a claim in proper venue advantageous to it based on the holding from McCullough v. Maryland, where the court held that the power to tax is the power to destroy such that a state couldn’t lay a tax on US bank notes.   As applied to this issue of whether the US can tax what the states must use to pay their debts, based on the holding from McCullough, no the US may not.
     
    Get rid of the capital gains tax on monetary coins, and let the market decide the price and whether they circulate. Waiting for the US Congress to pass laws eliminating the capital gains tax on monetary coins shows a lack of understanding of human nature. It simply is not in the interest of any member of Congress to make their duties substantially more difficult because it would significantly reduce their ability to create infinite amounts of credit and currency. It is in the interest of a state to establish a means to eliminate debts without having to first acquire federal reserve notes.

    • YuShan says:

      People will eventually abandon an unsound currency, as has happened hundreds of times in history. The current crypto hype is mostly just a speculative momentum chasing bubble, but there is definitely a genuine search for a monetary alternative ongoing too that contributes to this.

      There is currently massive demand for physical gold and silver coins and bullion too.

      • Michael Gorback says:

        If 10% of Comex gold buyers stood for delivery the entire exchange would collapse. Then we would see true price discovery.

        You can tell there’s a disconnect between Comex and physical. There have been times recently when I went to my local PM dealer and certain metals were out of stock. WTF?

        • YuShan says:

          Yes, there is a run on coins and small bars at the moment.

          With Basel III, a big chunk of the paper precious metal market will disappear because it is not profitable anymore because of the large haircuts required. That means markets will become more physical. I’m watching it with great interest.

    • David Hall says:

      To count one trillion dollars, one dollar per second, would take 31,688 years.

      They can not mine ounces of precious metals as fast as they just printed four trillion dollars worth of M2 money. Some people might not want a jar of gold nuggets. They might want a house, car, college credits or some expensive medical treatment instead.

  11. Phoenix Rising says:

    I’ve always been one to focus on things over which I have some control. I can’t control what the Fed does with interest rates or assets purchases/sales. However, I can control what I choose to spend my money on. “Buyer’s strike” and the power of “No” will be my guiding principles as an insidious episode of inflation grips the country. Serious inflation would be nipped in the bud if a critical mass of consumers did the same. Not holding my breath though…

    • Cobalt Programmer says:

      Can’t do this for essentials (gas, food, medicine and utilities). May be skip tourism, eating out and luxuries but essentials are required.

      • Phoenix Rising says:

        I agree Cobalt…it depends on an individual/family’s proportion of their annual budget that’s discretionary versus non-discretionary spending. However, substitution can be used even with some of the non-discretionary expenditures. Notwithstanding, excessive inflation is no picnic in the park, and could/should be avoided by not making foolish policy decisions that exacerbate it in the first place. The Fed should be tapering now, and not wait for inflation to reach a point where more drastic and painful measures are required It already has reached that point if one discounts the whole “hedonic quality adjustments” gimmick used by the BLS.

      • Ron says:

        Essential s are water food fire and shelter

  12. Nathan Dumbrowski says:

    Thanks for the video. Good to hear you getting the message out there. Nice to hear you vocalize a summary of so many of these topics in one interview. BTW also saw you quoted and mentioned on a digital coin site including charts where (they credited you). Watch out you may become MSM

    Good job

  13. MonkeyBusiness says:

    So S&P 10K?

    Crypto is crashing again leaving the stock market as the only “safe” option.

    • YuShan says:

      Stock market returns are likely to be negative over the next 10 years and possibly deeply negative. Shiller P/E = 37. That has never ended well for future returns.

      There really are no safe options at the moment.

      • Depth Charge says:

        My cash is safe, and so are my precious metals. They give me remarkable returns as asset prices crash. I’m betting against all of these debt junkies.

        • YuShan says:

          I’m mainly in cash and precious metals too. But both are also not truly safe. Cash loses value through inflation and precious metals can fall in price relative to legal tender.

          So there are no real good choices here, like you could in the past at least keep up with inflation by owning government bonds, or have reasonable expectations of a positive real return by owning a reasonably valued stockmarket.

        • RightNYer says:

          Hope you have plenty of lead to protect those precious metals with. I’m concerned about what happens in the next year or so.

        • Swamp Creature says:

          Don’t broadcast your cash & precious metal stash too loudly. This info goes onto social media sites for every burglar in the country to salivate on. Happened to me even before the Internet. Bought Krugerrands and was burglarized 1 week later. Watch out!

        • YuShan says:

          @Swamp Creature
          Of course I don’t keep valuables at home. But you are right. I see these guys on reddit posting their silver stacks, which are sometimes literally hundreds of kg in 1000 ozt bars. When I ask them how the heck they are going to move that stuff or smuggle it out of the country when the sh!t hits the fan, I always get downvoted ;)

      • Bobber says:

        That is true for individual asset classes, but if you hold a basket of assets in each category, you eliminate the risks.

        All wealth is relative. If you hold cash, lose 20% to inflation over four years, and avoid a 50% stock and 30% RE price crash, you have gained wealth, relative to other asset holders, which is all that matters. Your piece of the wealth pie has gotten bigger, even though you have lost money on paper.

        I think the biggest problems with investor’s view today are 1) fear of losing money to inflation and 2) failure to recognize the option value of cash.

        Cash loses value over time, but the holder receives a higher amount of option value in return. Cash should be a sizeable part of the portfolio during times like this when asset prices are super-inflated and the Fed might lose control. If you also hold some assets that rise with inflation, the potential loss of cash value to inflation shouldn’t bother you a bit.

        If I had a portfolio of just cash and gold, I’d throw in at least 10-20% commodities, RE, or stocks, so that the entire portfolio will not lose to inflation and will be well positioned to capitalize on an asset price crash.

        • Michael Gorback says:

          Except for the allocation proportions, I agree 100%. I’d put more into stocks, bonds, real estate, etc than 10-20%.

        • RightNYer says:

          Michael, but you’re likely thinking from the perspective of someone who already owns those assets at better entry points. What about someone who comes into some money TODAY? They don’t have the option of buying stocks and real estate at 2015 prices.

    • Depth Charge says:

      I’m sure some malignant narcissist billionaire will tweet some “diamond hands” nonsense and it will post a remarkable reversal. Because muh fundamentals.

    • Wolf Richter says:

      Lots of segments of the stock market are crashing too. It starts at the margin and works toward the center.

      • Ron says:

        The stock market takes out high flyers first then goes to medium overpriced companies then low hanging fruit first faze has begun beware the rich players always win

        • Old school says:

          When you get to the point that people are selling Apple and Microsoft to buy Campbell Soup and National Pawn you know you are on the downhill slide.

      • So the leadership narrows and the analysts chirp about losing one more brick in the wall. They can extend and pretend this rally ad nauseum. The next event is probably a currency crisis. I am afraid the more value that bitcoin loses, the more investors will want to buy it, while it has utility. The cheaper bitcoin gets the more it competes with the dollar. Should the Fed outlaw bitcoin (FDR gold?) while China is rolling out their tightly controlled version, then we have problems, because the global economy rests on maximum cooperation. The tariffs of the 30s comes to mind.

      • Arnold Ziffel says:

        Kind of like hypothermia that starts on the limbs.

    • roddy6667 says:

      The P/E ratios are insane. Reversion to the mean always happens. American companies are not making profit, just buying back stocks. It’s all a charade.
      Look out Martha, we’re headed for the rhubarb!

      • yxd0018 says:

        The reversion to the mean may not happen soon. Current stands at 2.2 standard deviation and still have room to grow if y2k is a peak.
        https://www.currentmarketvaluation.com/models/price-earnings.php

      • Old school says:

        There are a lot of valuation models that people use and some are above 3 sigma level already, but financial markets have a lot of outliers. I like what Hussman says that all models are shortcuts to the real valuation method which is future discounted cash flows. Right now cash payout on SP500 is $60 with mid single digit growth rate. Not worth $4200 unless Zirp is here for decades which it may be.

        • YuShan says:

          Almost nobody who owns stocks right now owns them because they think they offer value. The entire value proposition is premised on the idea that the Fed will always backstop them. If at some point the Fed cannot keep that promise because they have a bigger problem at their hands (collapsing currency for instance), the collapse will be brutal.

  14. Micheal Engel says:

    1) USD weakness is “transitory”. It might be over, or reach 87 – 88, thereafter bounce up. A stronger USD will chew up gold, WTI and other commodities.
    2) US gov infused liquidity to states, cities and other gov entities,
    which parked their “excess cash”, drooling in US treasuries.
    3) Institutions, businesses and wealthy individuals flushed with liquidity invested in short and long term US treasuries, because the future is deeply unknown.
    4) NDX failed to reach it’s next min. bullish target @14,434. “F” in bullish ==> “A” bearish.
    5) For a downtrend the min target will be achieved by an increased volatility around dma200.
    6) Sept 1/2 fractals zone dived NDX into two zones.
    7) Bouncing off this zone, after breaching it, reaching the weekly NDX Aug 31 Engulf, can send NDX higher to either an all time high, or to a newly formed right shoulder.
    8) H&S might send NDX to the conservative weekly cloud (18,54,104), to Feb 2020 area.
    9) H&S can fail.

  15. Jdog says:

    One thing is certain, whenever the government appears to give you something, they are trying to distract you and keep you from seeing whatever it is afraid you will see.
    They are using the magician’s tactic.
    The loose money policy from the 1990’s to 2007 was designed to distract the public attention from the outsourcing of the nations manufacturing jobs until it was too late to do anything about it.
    The current over government over reaction to the COVID episode and the massive government give away’s is the same tactic.
    I believe that what the future has in store, is a second round of offshoring beginning with work from home, and then the offshoring of those jobs, combined with a combination of double digit inflation, and across the board tax increases, resulting in the next great depression.
    I hope I am wrong, but at this point I do not see any other scenario…

    • Swamp Creature says:

      Yep, the WFH experiment was a dry run to work from anywhere including overseas. What you left out was a 30 to 40% dollar devaluation to protect the export industries competition from the cheap labor overseas.

    • stan6565 says:

      The real goal of offshoring, as written up in the Great Book of Globalisation, is for everyone on planet Earth to have a same wage for same job.

      Look up the wages of whatever you do, say, in Gabon, or Botswana, or Myanmar, and you will see your future.

      • roddy6667 says:

        Globalization is The Great Equalizer. Better than average countries are knocked down and poor countries increase their standard of living.

      • Depth Charge says:

        You forgot the most important part – it’s for a select few to own everything with the masses performing for them as slaves.

      • Jdog says:

        The goal of globalization was to increase corporate profits, raising stock price and making gillions of dollars for corporate officers, banks, and Wall St.
        No one gives a damn about the people of planet earth.

      • Swamp Creature says:

        When I was in Thailand in the 70s you could hire a hit man for $100. I wonder what the going rate is now. Adjusted for inflation it should be around $500.

        • drifterprof says:

          May be cheap here to hire a hit man (compared to ghetto price in U.S.?) – but you get what you pay for.

          Cheap hit man is most likely a brain damaged idiot not aware or sufficiently cautious about pervasive camera surveillance and high tech criminal investigation methods.

          When he flips, you will be the target.

    • Old school says:

      Most of Fed policy now is to manipulate people’s behaviour. For example once saving rates are zero and they print up cash to buy treasuries and mortgage back securities it floods system with zero yielding cash that is psychologically hard to hold. It encourages people to make stupid purchases.

      It encourages party in power to buy votes and creates immoral behavior as you subsidize sloth and reward the free rider on the economic system.

      • Michael Gorback says:

        I think buying MBS and Treasurys is at the end of its run. Where will you find a bid?

  16. SocalJim says:

    Deflation can knock down the market.

    Also the FED fighting inflation can knock down the market.

    However, FED approved inflation is positive for stocks.
    Why? Because the value of the NOA ( Net Operating Assets ) on the balance sheet rises with inflation. Under inflation, usually the RNOA ( Return On Net Operating Assets ) stays stable. So, onder FED approved inflation, NOA*RNOA rises which feeds into equity valuations.

    • Jdog says:

      The next trick they will pull out of their hat is to try to convince everyone raising interest rates is actually good for the market so keep buying. Anyone want to bet that the fools who think 75x pe ratios are good, won’t fall for that line too?

      • SocalJim says:

        You can not just look at interest rates. You have to look at interest rates relative to inflation expectations to get equity valuations right. If a firms cost of capital is much lower than inflation, the firm can borrow and invest in new assets that inflate in value faster then their financing costs. That is a positive for stocks. So, if the rates rise, but remain below inflation expectations, and the FED policy supports that situation, then stocks could rally.

    • Old School says:

      Inflation is good for stocks once PE level is crushed, but not starting at this level. Last time inflation hot you were better just sitting in treasury bills as interest rates took off as you basically kept up with inflation while stocks and bonds lost money in real terms.

    • historicus says:

      SocalJIm
      Wait.
      Isnt the Fed bound by their mandate to promote “stable prices”?
      Stable means “fixed” ….
      So they are breaking the rules, the agreements under which they are allowed to operate…and we are supposed to go “Yea!” because we have some stock and a house…rather than saying “Hey, wait a minute. These people are taking over and ignoring what they are supposed to do.”

  17. Nathan Dumbrowski says:

    There are three or more levers to be actioned in the near future . The end of mortgage forbearance, the primary credit rate increase (think mortgage rate baseline), and the PUA expiration. All will reduce the available monies in the system. Could the FED and major players be carefully timing these levers to reduce a system crash?

  18. It’s going to take an exogenous event. (Take your pick – Cyberhack, EMP, Pandemic II) The gasoline pipeline ransomware gambit was harmful. Nothing else is going to matter. The seqway out of monetary policy as the main tool will cause some disruption. The Fed is irrelevant, and who is controlling the money supply? They have used every chance to innoculate the system by pumping up money supply in aggregate. The writing is on the wall. Stocks and government are in a death embrace, they live or die together.

    • Michael Gorback says:

      Credit. Always watch the credit market. For starters it’s smarter than the stock market. In terms of available spending power it’s vastly larger than base money. Finally, when credit stops flowing everybody starts liquidating.

      The Fed has been, and will continue to be, ineffective regarding transmission of money into the economy under current conditions. I think their next move will be try to capture complete control over liquidity.

      I don’t know if it was the actual plan, but student loans were a clever way of sneaking a ton of money into the economy that bypassed the Fed.

      Stimulus checks also inject money directly into the economy bypassing the Fed.

      I think the Fed is going to make a power grab and take over the repo market. In 2019 and 2020 there were times that the big banks pushed away from the table and refused to play, causing a large scramble for alternatives. The resulting volatility cost a lot of entities in the short term market dearly.

      Given what’s going on now with banks fussing about reserves being too high and primary dealer banks intermittently refusing to lend short term to nonbank customers (eg, 2019 and 2020), I wouldn’t be surprised if the Fed opened up a permanent reverse repo facility open to all comers, thereby cutting the big banks out of the herd.

      They could also require all Treasury instruments to clear through the Fed. Right now about 4/5 is bilateral but I wouldn’t be surprised to see that erased. Maybe they’ve learned at the Fed it’s that you can’t let a handful of big banks decide when and who gets liquidity.

      Given enough control, the Fed could do the refusing depending solely on its opinion of liquidity supply and not accept treasuries for purchase for a while.

      Meanwhile the single most dangerous thing going on right now is the stimulus checks. That is the stuff hyperinflation is made of. Got inflation? Can’t buy what you need? Here, have some money. Now you can afford to buy things – at least until next week.

      One of my friends owns an Apple store. He said right after the checks arrived people were pouring through the door to get the latest $1,000 iPhone.

      • RightNYer says:

        Of course. The unnecessary “stimulus” checks stimulated Apple and Amazon. That’s about it

      • eastern bunny says:

        If the Fed takes over the repo and the treasury market, the next logical step would be for them to allow the citizens to open checking / savings accounts with them that will be 100% reserve backed. By the same token they should ban fractional reserve banking and no banck would be able to create money if not 100% backed by reserves.
        That would put an end to boom and bust economics and the power to create money shoul rest with the government and Fed and not commercial banks. It’s seems we might be heading that way.

      • MonkeyBusiness says:

        22 states have stopped giving out the 300 dollars weekly supplemental income.

      • Swamp Creature says:

        Stop talking about these losers that got their stimulus checks and misspent them. I couldn’t care less. I never got mine and needed the money to pay for a dental implant, so I’ll have to take the money out of my savings.

        • Lisa_Hooker says:

          SC – you could take some time off from complaining and avail yourself of one of the various ways the feds have set up to claim your free money. Unless, of course, you made too much money and don’t qualify. I have a hunch you’re not entitled to any free money. I wonder what you did to piss them off.

      • DougP says:

        People can own an Apple store? Are they not owned by Apple?

      • Credit spreads are super narrow. Can yields rise without affecting credit? I mean who is borrowing at the 20yr rate? If you need a mortgage get 2 10Yrs.

  19. Nicko2 says:

    Great weekend reading on this thread; as always!

  20. Micheal Engel says:

    1) USD weakness is “transitory”. A strong USD will humble stocks, RE,
    commodities…US GDP & CPI.
    2) Reappraisals and RE taxes never backup.
    3) Last year hospital’s best sector, the outpatients surgeries, suffered the most. They will do whatever it takes to squeeze u until death.
    4) The health care sector never stopped expanding, thanks to US gov. They have popup in old movie theaters, vacant stores, empty shopping centers, to serve u, to cut their cost, not your cost.
    5) American wives, who know it all, will cont to dehydrate themselves and their husband’s cells & pockets. US elderly are flushed with
    excess cash and assets, like never before.
    6) Many trails lead to the elderly overextended wealth .
    7) Say no to : pharma, MRI, diagnosis and blood tests… Build your own
    ammunition dump with healthy fruits & veggies. Cut oil, red/ white meat, eggs…coffee, charred burgers with alcohol.
    8) You will last longer without the doctors.
    9) Fasting for 24 hours once a month will cleanse your toxic inventory, without pharma. Learn how.
    10) Discipline fail us all, including myself, so cont ignore !!

    • Michael Gorback says:

      Back when this was Testosterone Pit I used to write occasional articles for Wolf regarding economic aspects of health care. A few years ago life got in the way.

      Now I’m motivated again, and what motivated me was when I simply couldn’t stand the burdens of solo private practice. I closed my office and signed up to work for a corporate-run group. This was gonna be great. No administrative duties, just take care of patients. Heaven.

      I gave my notice about 2 weeks later.

      What I saw was absolutely disgusting. I can’t even begin to start listing everything. I’m going to have to digest this and probably talk to some people better acquainted with the situation. I might even try an interview format and perhaps do a series.

      I fired my PCP of 20 years when he merged with a corporation. He’s a good doctor. He knows how to practice good medicine. The problem is that he is hobbled by the company and can’t be the doctor he could be.

      In addition, I caught them in a grossly fraudulent bill. I refused to pay it and they sent me to collections. I wrote to the collection agency and said they had made two mistakes. First, they didn’t bill me correctly and secondly they overbilled a doctor who saw right through it. I gave them the option of writing off my bill or talking to the Office of the Inspector General at Medicare. No reply.

      But don’t throw the baby out with the bathwater. If you’re having crushing chest pain all the fruit in the world isn’t going to save you.

      I practiced for 42 years and even I’m having problems navigating the system. I went to my cardiologist a while back because I was unhappy with my BP. He had done a heart cath on me in 2005 that was negative. I never have any angina. Nevertheless he talked me into doing a nuclear stress test.

      I’ve always trusted this guy but I started to have doubts when he said we could do it right now because he had it set up on his office. So we did the test and the EKG abnormalities and cold spots on the nuclear from 2005 were gone.

      He recommended more tests to asses my cardiac risk and referred me to the hospital. I pointed out that my tests were BETTER, which he ignored.

      Now, one of my basic principles has always been before you order a test ask yourself what will you do if it’s positive and what will you do if it’s negative? If the answer is the same don’t order the test.

      So I didn’t get the test because whether it came back high risk or low risk the advice would be the same: eat healthy, exercise, etc.

      The day before my follow-up visit, where I planned to go over the rationale for the test, his office called and said they canceled my appointment because I didn’t have the test. That is NOT how you treat people.

      BTW, it’s hard to tell with medical fads but actually there’s some good stuff in egg yolks and the dietary cholesterol story was debunked years ago.

      Please don’t talk about “toxins”. A lot of people talk about cleaning out toxins but they can’t name a single “toxin”. If someone starts talking about toxins my ears shut down.

      Intermittent fasting is good for weight control (often as simple as no food between dinner and breakfast). I eat one meal per day with an occasional evening snack, yet most people still consider me toxic.

      • stratus says:

        Thank you for your contributions. You bring a lot to the table.

      • Nicko2 says:

        Great tips!

      • 91B20 1stCav (AUS) says:

        Michael-thank you. I have unintentionally upset many in the family over the decades by my preference for one daily meal (can’t imagine anyone bemoaning my lack of regular social presence/appetite at the lunch or dinner table, but they do…). E Pluribus Unum…

        may we all find a better day.

  21. eastern bunny says:

    Are the bond vigilantes really dead?
    If inflation is 4% why are people buying bonds yielding less than 1%?
    I can understand the view that Fed is buying treasuries and keeping the rates low but who is buying trillions of corporate debt that is also yielding less than 1%?
    Surely the Fed is not, then the question becomes what is wrong with bond vigilantes?

    • sunny129 says:

      Bond vigilantes went out the wat dodo birds!

      Print more, spend more and kick the can down!

      I stick to various ETfs with div in variety of sectors, fields, countries along with some long PUTS on S&P 500. Waiting for eventual ‘shit happens’ down the road!

    • as long as the bond sheriff is buying 120B a month

  22. sunny129 says:

    I am NOT up to video or pod broad cast. I will wait for the transcript. I went thru coments to get the gist! Same complaining but no real solutions for the problems mentioned. Just moaning, complaining and whining.

    Some see ‘transient’ inflation becoming permanent and worse. But some predict ultimately deflation after chaotic hyper inflation. No one really knows!

    Expected ‘reversion to the mean’ slow crash is being thawarted by Fed by many ways – printing money of thin air with MMY as a solution!

    • Michael Gorback says:

      If we had solutions we would be pontificating on CNBC. Even if we had bad solutions.

      I don’t think it’s whining and moaning but if that’s all you get out of your participation here then why are you here?

      Go to Zero Hedge where “Tyler Durden” knows everything.

      • Michael Gorback says:

        BTW you should expect ambiguity in investing. Just like gambling you’re placing bets on an uncertain future.

        I think what you perceive as hand-wringing is just people trying to figure out risk management.

      • Lisa_Hooker says:

        Sometimes, when you have zero control, the clouds are darkening, and you are totally disgusted, it feels a little better (only for a while) when you complain a bit. We both know it doesn’t make any difference.

    • Wolf Richter says:

      sunny129,

      There won’t be a transcript. So enjoy the wait. This is not my podcast. I was interviewed by HoweStreet, and it’s their show. You can ask them for a transcript. Maybe they’ll put one together for you.

      Not many comments here reflect what is in the show.

      BTW, only my own podcasts — THE WOLF STREET REPORT — here come with a transcript.

      • Michael Gorback says:

        Don’t blame me. I fell asleep during the podcast. Besides, I watched you closely in the lower right hand corner during the podcast and your lips never even moved, which makes me very suspicious.

        It’s too bad about the transcript. I read way faster than I can listen. Since I no longer drive to work podcasts have lost any value in my life.

        Please try to get transcripts from these outside sources. Be kind to the retired elderly.

        • NBay says:

          Yeah, I prefer reading too. Allows one to back and forth, re read MUCH easier to get clearer picture of things.

  23. Micheal Engel says:

    Fourteen people died when a cable car connecting Stesa and Mottarone, Italy crashed.

    • Michael Gorback says:

      Holy crap! I was on that ride in 2019. Talk about a narrow escape!

      Skip the cable car and grab a boat to the Borromeo Islands instead.

      Those Borromeo guys had scads of money. Some of the most lavish palaces and gardens I’ve ever seen.

      I remember walking up the gigantic marble staircase in the entry and trying to imagine how many man-hours of wealth just the freaking stairs cost.

  24. Micheal Engel says:

    One moment please.
    This channel should be available shortly. A massage lasting for > 24H :
    CBS, ABC, NBC, Bloomberg, ESPN…
    Don’t come back !

  25. VintageVNvet says:

    Yes r2/3 P/E ratio’s are insane.
    No, ”reversion to the mean or any similar event does NOT always happen.

    Unless there is an entirely closed system, with completely regulated ”conditions” there are ultimately many more than one outcomes possible.
    What you are suggesting, while, with conditions may be possible to achieve in some physics/chemistry situations, but not otherwise.
    Please bee very clear that even the sun coming up tomorrow morning is only a possibility, though in our short human existence may reasonably be considered certain.
    “Economics is a ”social construct” at best,,, a hopelessly and deliberately endlessly complex amalgamation of anecdotal possibilities mostly,,, and a scamola of the worst kind visited upon productive working folks who make stuff or make things better, by the paper mongers of the world stealing the profits of the workers.
    SO, “Workers of the World Unite” Throw off those gold chains – as worn by every player on the baseball game we watched last night — trade in those beemers and Porches for tractors,,, etc., etc., LOL

    • Old school says:

      Workers don’t make profits. Owners make a profit or a loss. Many new factories in US require in excess of $1 million dollar investment per person to be competitive. It’s not a perfect system, but a worker without capital investment is usually not worth much in the 21st century.

    • Lisa_Hooker says:

      Thanks, VV, for pointing out the fallacy of mean reversion, long a favorite of martingale system stock purchasers. One thing does hold true for sure: entropy always wins. Always.

  26. Karl says:

    So as for the primary question at bar: Can Anything Knock Down the Stock Market? The short answer is: No. So that of course means mortgage the house, barn, cows and chickens and go all in right? Cause if it goes bust the feds will come to my rescue because I’m too small to fail.

  27. TheFalcon says:

    The question was can anything knock down the stock market. The answer is yes, and what is the character limit for a post here to list them.

    What is the current P/E ratio, around 37? When has the P/E vaulted far above its average and not come tumbling down? Not to be one-sided, when has it dipped far below its average and not clambered up beyond its average?

    Lots of bad decisions get made in good times. Lots of investing geniuses out there who are too young to have been pounded in a downturn. The market can be a ruthless educator for those who believe they are smarter than the teacher.

    • Michael Gorback says:

      I believe it’s called “malinvestment”, but you’d have to read Mises instead of Keynes to get the picture.

      BTW although reversion to the mean is an objective historical observation there is no cosmic law that says there MUST be reversion to the mean. It’s an inference. Just because the sun has always come up in the morning doesn’t mean it will come up tomorrow.

      To infinity and beyond!

      • TheFalcon says:

        Well we are talking about prognostications are we not? While nothing is guaranteed, my money has to go somewhere, and i will bet it on the sun indeed coming up tomorrow.

        • Michael Gorback says:

          Prove that it will.

          This is why people get flattened by flat tail events. They tomorrow to be like today.

        • The Falcon says:

          There is no need to prove or disprove anything. You make your predictions on what you think is most likely to happen and place your bets accordingly.

          The latest home sale in my neighborhood closed $400K over list price. I opted not to engage in a bidding war and pay and extra $401+K to invest in it. Time will tell whether not doing so was a good call or not.

    • Auldyin says:

      TF
      Bonds have been on a rising trajectory for forty odd years because of falling interest rates. (Fed tricks)
      Logically stocks should follow suit with a risk premium, hence rising long term PE. During the 70’s inflation, stocks actually yielded less than bonds for many years.
      Only a return to ‘proper’ interest rates will lead to a return to ‘proper’ P/E’s and hence possibly a price fall.

  28. Auldyin says:

    Great interview, Wolf.
    Mirrors a lot of here.
    You do like your electric cars! Better than an ICE 5ltr V8? Get them side by side on a drag strip or race track. The Ford woman in UK says public are proving slow to convince and she wants more Govt money to meet Govt targets, surprise, surprise. It’s got to be renewables for recharging, otherwise you’re just burning the fuel miles away and losing a lot in transmission. Imagine if you only had a windmill and a solar panel in your back yard to charge your car and you wanted to drive 200mls tomorrow at 70mph. How big would the windmill have to be, even if there was a gale all night. Solar panels would be in the dark. Into one big expensive battery then into another big expensive battery is not a good way to go. Multiply that up for every car in USA. It’s a green fantasy land and there’s no point in doing it if it’s not green.
    Credit cards are seriously weird. I liked your point about interest savings going into demand for goods, I never thought of that, I could only see reduction of debt level coming out of demand. Paying off the debt is instant demand reduction, whereas, interest savings would take longer to work through but might be more beneficial to consumers in the longer run, but could also encourage the debt to go back up again. Weird?Great to watch it all play out in your charts.

    • Michael Gorback says:

      The real green fantasy is that we will have the necessary materials to make a battery. If you want to do EV you’ll need rare earth elements, which is a filthy mining and refining polluting process. You’ll need copper, which has degraded in ore quality over the years. You’ll need nickel, graphite, cobalt, and lithium.

      Very few deposits of these are in great places. China is the 400# gorilla in terms of deposits of these materials. Other options include the Democratic Republic of Congo and Myanmar. Great places to do business.

      Right now there is barely enough mineral supply to maintain the 1% EV market share.

      Wind and solar aren’t going to keep things going. Nukes and fossil fuels for now.

      • Wolf Richter says:

        Michael Gorback,

        It’s so funny. There are all these people out there giving us millions of reasons EVs will never ever work, the grid this, and rare earths that, and whatnot, and they try to sound so logical and persuasive, and meanwhile, more and more people are just buying those EVs that will never ever work and are loving it :-]

        • Auldyin says:

          Wolf
          This is obviously going to be a huge subject of debate over the next few years. If I’m still around, I would love to see you chart the ‘take up’, the cost of subsidies, life of product costs for consumers, etc etc.
          It could become a mainstream feature for the Street if you have any time to do it.
          Electric already lost once, 100yrs ago, but maybe Mr Musk’s batteries are so much better now that Ev can win this time round with all the subsidies to help?

      • NBay says:

        Time for my favorite version of the Periodic Table (when it comes to pure scarcity) questions? Realize processing/polution, access, etc also play a part.

        https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%27s_crust#/media/File:Elemental_abundances.svg

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