A Bullish premise and prospective !

 

 The Bullish take: After many an banking analysts has loaded up on their warnings that the euphoric burdened market is due for a correction to ease some of the massive retail euphoria (some of that froth and euphoria significantly has shifter these past few weeks to squeezing the shorts within the most shorted stocks hard-to-borrow plays), a renown self-serving bullish hypster , one of the herd’s [talking up his own book] biggest permabulls, did just that when JPM's Kolanovic urged investors to ignore warnings about a the mega bubble (On Wednesday) I have been warning you all about incessantly!  As despite clear evidence of a mega bubble everywhere you look, he stated to just buy the dip like Pavlov’s conditioned trading-bots-dogs on any selling from the feud between retail investors and hedge funds. Conceding that we have “seen a number of strategists calling for a market correction or indicating equities are in a bubble” coupled with recent “turmoil related to trading activity in small highly shorted stocks” the JPM quant so called guru disagreed strongly and said that professional investors are far from bullish, as the firm’s model tracking computer-driven strategies to stock-picking funds shows their equity positioning sat in the 30^th percentile of a 15-year range (which, of course, is a reason that the VIX remains remarkably sticky and volatility control strategies simply have not been able to leverage up to historical levels, but we should not expect Kolanovic to dwell too much on what's really going on if there is an JPM agenda to be promoted). Nevertheless, according to the Kolanovic, there are 3 main reasons for the firm's (perpetually) rosy outlook:

• Ø Overall equity positioning is low in a long-term historical context, and they expect it to increase!
• Ø  We expect the Covid-19 pandemic to rapidly subside on the back of vaccines and population immunity (which they believe has already started to happen)!
• Ø  They expect monetary and fiscal support to remain in place and grow substantially (on tis I agree) likely driving increased consumption, global trade, and demand for goods, thus supporting higher inflation (something that I do not agree with).

“In that light”, Kolanovic notes, “any market pullback, such as one driven by repositioning by a segment of the long-short community (and related to stocks of insignificant size), is a buying opportunity, in our view.”  He then provided some more detail behind his three core views, starting with his view how funds apparently are not that bullish, despite this week’s mauling of the most popular hedge fund positions which are being dumped in masse ahead of upcoming anticipated liquidations to likely meet margin calls; Positioning across risky asset classes, and in particular in equities and commodities, in a long-term historical context is low. Also that 2021 should be a transformative year of Covid-19 recovery!

 

Ironically, in a week when stocks were smacked around and the VIX is rising above 33 on its way I believe to 39.00 then 46.75, Kolanovic once again goes against the grain and expects the VIX to magically drop just because: Ge stated that “We expect the VIX to decline into the mid-to-high teens and positioning, accordingly, to increase from the ~30^th to ~60^th historical percentile. He went on to state that realized volatility has already declined significantly (SPX-500 realized volatility ~10 vs VIX ~25 is a near-record spread). Given the low levels of inflation over the past decade, global trade war, and recent pandemic, the exposure of investors to equities and inflation protecting assets such as commodities is also very-low (as compared to pre-Great Financial Crisis era). Of course, if the VIX does not decline but keeps rising, expect as Clubber Lang stated to Rocky “expect pain”. He then focused on the pandemic and clearly ignoring the warnings that mutant Covid-19 mutating strains will become a real medical drain over the globe and will hit here in the US as well, as such he wrote that he expects the global Covid-19 pandemic “to decline rapidly in the coming weeks.” He believes the increase in cases and deaths over the past few months was “Holiday exposures” and the beginning of large-scale vaccination programs in the US, [the current vaccination pace is to approximate 1-million vaccines a day]. And given the estimation of natural immunity (cumulative cases), current pace of vaccination, as well as other considerations (e.g., the impact of warmer weather, variation in susceptibility here), he expects the pandemic to effectively end in 2021/Q2. In addition to the positive impacts of the above drivers, there is also a positive feedback loop between them, which he believes will lead to a rapid decline in hospitalizations and enable a mega fast reopening of economies this spring (I wonder how many businesses will still be standing).

ü  The only question is whether the new administration will help him to become right, or will lockdowns have to extended in hopes of getting even more stimulus from Congress/Powell.

He focused on the source of the bubble (but there is no bubble in his opinion) just a very real bullish move, due to Fiscal and Central Banker manipulation 😊. He writes that they should “remain very accommodative given the elevated unemployment levels and over a decade of low inflation running below their targets.” He' might be somewhat right as almost all central bankers including our FED are trapped and they can never again tighten or else they will unleash the mother of all stock market tantrums that could lead to a serious implosion. It is also likely why the FED recently revised their entire “BS” inflationary framework, effectively giving itself a huge proverbial greenlight to keep injecting over $120 billion per month of liquidity (Buying new-debt bonds from the massive deficit debt) in perpetuity even if home prices are surging by over 10% annually [creating another mega housing bubble in my opinion] as they are now. He went on to note that “fiscal support for individuals and businesses harmed by the pandemic will also likely continue and be a significant driver” [a likely driver of the most shorted stocks that we have been seeing of late as the new stimulus is gambled via the stock market)

He went on to states that “the monetary and fiscal backdrop of 2021, along with the strong recovery from Covid-19 and relatively low positioning in risky assets, should be a huge positive for stocks and commodities and negative for bonds.”  His conclusion: “short-term turmoil, such as the one this week, are opportunities to rotate from bonds to equities.” Then at the end of the report he then admits that while his view is positive, we do acknowledge that some market segments are most likely in a bubble. This is a result of excessive speculation (including but not limited to retail investing) as well as perceived benefits for these segments from the Covid-19 pandemic and related political trends.

I am seeing massive signs across the market of speculative excess are everywhere. Penny stocks soaring like moonshots. Cash has been pouring into trendy solar and EV bets; huge risky debt paying less than ever; huge gains in zombie stocks these unhindered and unrestricted animal spirits and historic valuations levels bear-watching 😊 as it is imprudent to hope and pray that there is a greater fool lurking out there for you to unload to it you keep buying at these nose-bleed levels! Retail traders are currently fueling the most speculative trading strategies, the market for new issues (IPO’s and SPAC’s) is booming, while short interest in the SPY is near decade lows. 

Data has consistently shown that overall stock buying rose after the last round of pandemic-relief checks was issued, and it was not just the retail crowd. A record number of investors with ~$560 billion overall say that they think they are taking significantly higher-than-normal levels of risk, according to Bank of America’s latest survey “Are there any bears left?” Even Goldman Sachs says “unsustainable excess” is evident in very high-growth, high-multiple stocks and across special-purpose acquisition firms, or SPACs.  That is the same view echoed by Citigroup however they diverged saying weighed global equity prices on both a relative and historic basis and concluded even expensive U.S. shares could have more room to run. “We would never advise anybody to chase a bubble,” they wrote on Friday. “It could burst at any time. But if CAPEs were to hit previous highs then the U.S. indices could go up significantly higher!”   

Incessant hot IPOs, a rise in thematic investments [Thematic investing is a form of investment which aims to identify macro-level trends, and the underlying investments that stand to benefit from the materialization of those trends. a renewed boom in day-trader activity and “dramatic runs” in EV’s, Solar and cryptocurrencies are all reasons why bubble anxieties have emerged, JPMorgan strategists led by Mislav Matejka wrote in a research note this past week...In a market awash with “excess” central bank liquidity, it is a debate that will continue to rage. One aspect of that debate is the risk the same reflation trade boosting stocks comes with a sting in the ass for debt investors.

With benchmark treasury yields failing to break above 1.2%, hosts of investment-grade debt offer yields near or below zero.  History has shown me in the past that money can be made as mega bubbles inflate. However, we will not be able to evade a real bear market that will come, but before then markets may get more frothy before logic and reality sets in.

Today this market in my opinion is very-very euphoric and 90% of the easy and prudent LONG-side money has likely been made already, there are few opportunities I like, to make long-side longer-term money you have got to find a proverbial Goldilocks environment.

Please note: “hedge fund short sellers” an “NEW” abundance of US household bailout stimulus payments could continue to fuel the recent retail trading boom. The equity market peaked in 2000 and this occurred following a year in which household credit card debt rose by 5.3% and real consumer checking deposits declined, then bang during 2020 credit card debt declined by more than 10%, checking deposits grew by $4.2 trillion, and savings grew by $5.1 trillion. On top of these savings, many economists expect more than $1 trillion in additional fiscal support in coming months, including another round of direct checks. Although the level of net margin debt currently represents 0.9% of US equity market cap, similar to the 1.0% share in 2000, it reached 1.2% in 2018. And the 35% increase in margin debt during the past 12 months pales in comparison to the 150% rise we saw in 1999!

 

A brief reflection on my weekend report that was 24-pages long) and the accompanying idea/play list was (14-pages)

Most new-investors / traders are more interested in getting rich-quick (taking on high levels of risk) rather than preserving their wealth through prudent investments / trades. This is why they almost never sell their stocks (ideas) no matter how many unrealized gains they have or losses.  As I have repeatedly stated in my writings these past several months, I am of the sincere belief that stocks are in an “classic mega bubble”. Still most investors will ignore the obvious warning since greed dominates their emotions. During the past 50 years we have seen 5 vicious nasty bear-market corrections in the Dow of between 40% and 55%. But even with these bear-market corrections, the Dow is today almost 39-times higher than in was 1970, due to massive rebalancing (out with the dogs, in with the new-high-fliers) manipulation...

As an example the DOW is not the same DOW as it was in 2007-2008, and it should NOT be analyzed or reported as such by the cheerleading media, as any ass-clown manipulator can push out the dogs and bring in the higher beta darlings, that were under-owned by index players (also more significantly priced additions) so as to influence the cap weightings and make the index soar.... The DOW is not as it was 11 years ago, its highly manipulated as are the other indexes are worse yet is how they manipulated the Russell-2000 as its far-far worse...the weightings in the DOW and NDX are crazy as well as a hand full of stocks account for the majority of the weighting and as such the moves! 

• In August 2020  Amgen, Honeywell, and Salesforce replaced ExxonMobil, Pfizer, and Raytheon
• In April 2020        Raytheon Technologies replaced United Technologies. Raytheon is the name of combination of United Technologies and the Raytheon Company, which merged as of April 3, 2020. The newly combined conglomerate does not include previous subsidiaries Carrier Global or Otis Worldwide
• In April 2019         Dow Inc. replaced DowDuPont. Dow, Inc. is a spin-off of DowDuPont, itself a merger of Dow Chemical Company and DuPont
• In June 2018          General Electric was replaced by Walgreens Boots Alliance
• In March 2015      AT&T was replaced by Apple.
• In Sept 2013       Alcoa, Bank of America, and Hewlett-Packard were replaced by Goldman Sachs, Nike, and Visa
• In Sept 2012          Kraft Foods Inc. was replaced by UnitedHealth.
• In June 2009         Citigroup and General Motors were replaced by Cisco Systems and Travelers.
• In Sept 2008          American International was replaced by Kraft Foods Inc.
• In Feb. 2008          Altria Group and Honeywell were replaced by Bank of America and Chevron.
• In April 8 2005     AT&T, Eastman Kodak, and International Paper were replaced by American International, Pfizer, and Verizon

Please remember from the aforementioned examples that all the stock incessantly hyped indexes do not even remotely display the truth. Unsuccessful or failed firms are continuously taken out of the index and the most successful firms are added.

As I have written about several times recently, I believe we are now embroiled in an “classic mega bubble” that is about to implode in the next few months. With the financial world fast approaching economic paralysis it is difficult to see how this can end well. Instead, what now looms ahead of us can only end terribly and most probably extremely badly. As I have stated since 09/2019, the current problems started at that inflection point with major pressures within the global financial system and the centrals bankers led by our FED ran to the rescue through massive money printing...then about 5-months later by February 2020, global central bankers were extremely pleased that the Covid-19 pandemic allowed them (tin-hat conspiracy theory suggests they may have had a hand in the distribution) to attribute the Covid-19 panic as the ultimate excuse for the panic situation they were embroiled in.

So, in essence Covid-19 was an extremely well times justification for the world’s great catastrophic economic situation... a horrible down-draft economic catalyst that will guarantee that the mega and I mean mega global bubble will have a devastating conclusion. The Covid debacle/crisis enabled central banks to create a Tsunami wave of cheap-cyber money and debt, pouring down chaotically into various sectors of the real economy (massive buoy). They were able to do this without having to explain to the world that the financial system was already imploding before the Covid-19 crisis hit.

As investors continue to digest last week’s wild rollercoaster ride in some of the heavily shorted hard to borrow names propelled by Robinhood & Reddit traders who in turn fueled volatility, they will also look this week to the regular cadence of quarterly earnings reports and economic data to be released to confirm their assumptions.

King-Trump assured the markets that only he could levitate them indefinitely, was he right? The post Biden run up to this latest tiny “so far” correction has seen “impressive” price action in most assets has been steadily bullish forcing most to join the trend chasing momentum plays, from chasing bitcoin, TSLA and other reopening plays, small caps & micro-caps and now lately the Reddit / Robinhood large-short interest plays creating an interesting collective psychology of the masses, all based on the same principles of greed and fear. Wherein newbies have joined the trading space (due to generous stimuli checks, enhanced unemployment and massive loan forbearance-type of plans) there are more than 50 million so called traders across the various trading apps and that number has probably increased again.

Ø  The FOMO aspect of trading has never been stronger. The new normal 😊 as crazy as it sounds is the need to experience 30%,50%,60%, even 100% returns in days and weeks.

Earnings better exceed expectations.   We will get several more Big-technology names to release their earnings that will likely punctuate the flow of quarterly results, with GOOG, AMZN, set to report on Tuesday afterhours! We saw that FB’s results last week offered a perplexing mixed picture of the internet advertising landscape against the ongoing Covid-19 crisis. We saw that their 4^th quarter advertising revenue easily topped estimates, though the firm noted “significant uncertainty” remained over the trajectory of their ad business heading into 2021 (the massive King-Trump & Uncle Joe Biden election shroud has closed). While Facebook’s social media advertising business is not a picture-perfect comparison to GOOG’s search-driven advertising business, the results suggested a strained environment for online advertisers with the Covid-19 virus still inflicting massive disruptions across various of their business customers. Analysts are looking for GOOG to report accelerating revenue growth in their fiscal 4^th quarter versus the 3^rd quarter, as improving operating conditions for their advertising customers should have boosted results at the end of the year.  Analysts are looking for sales, excluding traffic acquisition costs, to grow 18% to $44.16 billion, versus the 15% growth posted in the third quarter.

Meanwhile, e-commerce behemoth “the business killer” AMZN is likely to report another blockbuster quarter amid the accelerating shift to online shopping during the Covid-19 pandemic. The firm will likely post its first-ever quarter doing more than $100 billion in revenue (please remember that sales do not equate to profits) which would bring full-year 2020 revenue to a staggering $380+/- billion. While retail sales across the U.S. scaled back across most consumer categories in the final months of the year, sales at online retailers remained robust. Data showed that in December, U.S. non-store retailers “e-commerce platforms” grew sales almost 20% over the same month in 2019...can this continue after the reopening! Data points point to consumers becoming increasingly comfortable purchasing online every day as opposed to every now and then! Such data points to the following near to long-term potential implications for AMZN as they should see upside to GMV [gross merchandise value] estimates in 2021 and beyond due to the trend... and they could also experience moderating customer acquisition/retention costs as overall greater purchasing frequencies by customers like me reinforces their overall brand.

Into Friday’s January payroll report we could see some volatility to be released on Friday, the U.S. Labor Department’s January jobs report will likely show that the economy resumed adding back some payrolls at the start of 2021, after a dip in hiring in December if they do not look out for negative headlines to permeate the news flow.  Consensus expect to see the unemployment rate hold steady at 6.7% for a 3^rd straight month and a modest rise in non-farm payrolls they anticipate non-farm payrolls rose by 58,000 in January, after declining by a net 140,000 in December as of December, employment was still ~10 million below its pre-pandemic levels seen in February of 2020, after even 7^th straight months of payroll gains failed to fully recover the massive number of jobs lost at the worst levels of the pandemic. The biggest contributor to the December drop in payrolls was services sector employees, as leisure and hospitality industries shed a massive net 498,000 jobs in the final month of 2020. This phenomenon may be reflected again in January before mitigating in the coming months, as funds from the latest $900 billion fiscal stimulus package and hopeful vaccine-conferred immunity to COVID-19 percolated through the deteriorating economy.

Initial jobless claims during the survey weeks for the non-farm payrolls report suggests some downside risk to the report, however. During the survey week, or the week including the 12^th of the month, first-time unemployment claims spiked above 900,000, closing back in on levels not seen since August 2020. But at the same time, continuing claims and claims for federal pandemic-era unemployment benefits also retreated, suggesting some reentrants into the workforce during the month.

Since the beginning of the January NFP [non-farm payrolls] survey period, continuing claims in regular state programs, PEUC [Pandemic Emergency Unemployment Compensation] and extended benefits have declined close to 160,000, consistent with the view that the labor market could have stabilized in January (key word = could).

Looks about time the GOP gets a taste of their own obstructionist behavior

Senate Democrats are preparing to move stimulus items that qualify through budget reconciliation process in hopes of law getting passed by mid-March. There are still disagreements among Democrats regarding the details of the bill as Republicans warn use of budget reconciliation will hurt relations...how mush more can they be damaged I ask? (link).

The republicans are once again crying foul, like the little girls they are after blocking Obama’s every-move and not considering any of the 690 house bills that passed the house for a vote in the senate under King-Trump, using every trick they could muster to force votes on Supreme court and lower court justices, what hypocrisy!  We learned that the Democrats taking a page from Mitch McConnell play book of exploiting the rules of the Senate are willing to “go it alone” on the new Biden Covid-19 relief package if Republicans refuse to move quickly on a strong relief package (the majority want to hold it up). This past Thursday, Senate Majority Leader Chuck Schumer threatened to circumvent the 60-votes required to pass most major legislation by invoking a budget process known as reconciliation which allows some bills to bypass the legislative “BS” filibuster rule, the GOP used this to enact the KING-Trump tax giveaways if you remember! He stated that “We have a responsibility to help the American people fast, particularly given these new economic numbers. The Senate will begin that work next week”. Most of the senate older than dirt member (many in their 70’s) will likely not be alive when the massive negative consequences of this reckless spending fall on the shoulders of the next several generations. 

In order to proceed with reconciliation, Democrats will need to pave the way by passing a budget resolution which instructs committees to draft legislation. On a Tuesday conference call, Schumer told his fellow Democrats to be prepared to vote on that resolution as soon as next week.

Democrats want to pass more coronavirus relief before unemployment benefits expire in March. The Senate will also need to juggle passing legislation with former King Trump's 2^nd impeachment trial that will start the week of 02/08/2021. Democrats appear poised after getting repeatedly “bitched slapped by the GOP for years” to pass the Biden $1.9 trillion Covid-19 relief package with a simple majority!

 

The FED is a massive economic drain on our economy, they wage WAR against the working-class to enrich the elite

 

The FED in reality, is a non-independent governmental agency, that does the bidding of the powerful politicians, the TBTF-bankers, the elite/most wealthy “Top 5%” and influential corporations has been waging WAR on the American middle class and working-class for decades and both groups are getting poorer (and they have almost wiped out the middleclass). Real wages of the working class have been at best stagnant for decades (many Americans have seen a massive deterioration in their real-wages when adjusted for real-inflation) decent paying jobs are extremely scare if they can be found at all...for Americans to seek a decent single wage-job to sustain the pursuit of the elusive American Dream...[ The American Dream used to be the belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society where upward mobility is possible for everyone. The American Dream in the past was achieved through sacrifice, risk-taking, and hard work, rather than by chance] Now it is commonplace for corporation in the greedy pursuit of profits to export once decent American jobs overseas (they even get perks from out politicians to do so). While domestic small and medium businesses get burdened with taxes and government red tape. There are bailouts provided to corporations, other TBTF-bankers, and politically connected business and let us not forget to other central bankers to the tune of trillions while small-business owners of main street businesses go bankrupt. The massive almost endless flow of Q/Es have propped up the stock market, largely owned by the top 1% to 3% of the elite. So in reality the rich are getting significantly richer while a the so called greatest nation on earth has a record number of its people on food stamps; growing food insecurity has exploded, a record number of Americans have no health insurance, homelessness is on the rise (near record levels)

A massive amount of the blame 85% or better rests with the lecherous Federal Reserve controlled by the TBTF-bankers etc. as they “a private group of elites” who at will get to print money out of thin air for themselves and their cronies while their mainstream media tells everyone the FED has their backs and is a financial demigod and should never be questioned. They get richer and more powerful while the vanishing-middle-class and the working class inherits massive dent loads (economic enslavement) currently the middle class has one foot in the grave and the other foot on the proverbial banana peel, thanks to our corrupt and dysfunctional system of monetary policies and money creation. It is time to end crony capitalism, which is leading us deeper into the financial totalitarianism cesspool!

Follow the smart money...CEO's cashing out

 

Follow the smart money...After reducing buybacks to conserve cash, American corporations are repurchasing shares again at a breakneck pace. Corporate officers, on the other hand, are a bit less enthusiasm for their employer’s shares. In the first two weeks of 2021, a total of 1,000 insiders sold a bevy load of their own stock and 128 bought shares, leaving the sell-to-buy ratio poised for the highest monthly reading in data going back to 1988, according to Washington Service. Meanwhile, the same corporations announced $33 billion of buybacks over the stretch, up 49% from a year earlier, according to data compiled by Birinyi Associates. CEO’s and CFO’s and company insiders are NOT stupid, as share buying by corporate officers has declined significantly after a FED liquidity intervention and massive fiscal stimulus flood, and a near parabolic 10-month rally drove valuations of their firm’s stock to levels not seen since the dot-com bubble. Insiders and corporate leaders fully know that their firms are more than fairly valued, and they are not going to rush to put more of their own money into their firms shares at these nosebleed prices JMHO.

This is NOT first time that CEO’s/CFO’s and insiders have diverged like this.

Ø  In 2014, insider buying dried up while corporate America spent a near-record amount of money on buybacks. That year, the SPX-500 advanced 11%. Since the end of December, the SPX-500 Buyback Index has risen almost 6%, compared with a gain of 1.1% for the broader index.

Ø  Financial fuzzy-math engineering through corporate buybacks are returning back in a significant manner once again as firms are sitting on cash, are likely to break several quarters of profit declines this year; via financial “smoke-screen”

o   Corporate insiders, on the other hand, are retreating after their buying correctly signaled the bottom in March. The sell-buy ratio tracked by Washington Service exceeded 4-to-1 in November for the first time in almost 2-years and has since risen to even higher levels.

Company executives sold over $347 million worth of shares this year through Friday, that is 19 times the total they purchased. How are investors objectives aligned with management and if management is selling why are investors buying?  Ideally you would like to see that insiders and management feel that what they own will continue to grow in value, as opposed to the SELL message. Clearly, the message from the C-Suite, much like that of so many officials across the nation during Covid-19 lockdowns, (like I used to tell my kids...“do as I say, not as I do.” In this case just keep buying my stock while I sell my discounted shares to the next herd of bag-holders as I find my shares to be over-valued!

I live in the real-world, with abundant inflation! BUT If like the FED you live with Alice in Wonderland you may never see inflation either!

 

This past week Uncle Joe Biden officially became US President with a “new deal” “bailout everyone” agenda which will exceed any prior stimulus actions needed to combat serious economic contagions in American history; to defeat the Covid-19 virus, promote economic growth and restore America. There is little doubt in many Keynesian flawed economic premise minds. Now that Biden can take advantage of the still ongoing crisis and reflate, they say with certainty (absurdity I say) that the US economy will recover and grow significantly. They state with confidence that investments will come flooding into America from around the world, driving the precious dollar [that has been deteriorating since March 2020], significantly higher against the currencies of nations that persist with austerity measures (in other words, every currency of every nation that refuses to reflate as much as the US will and has been, someone ought to tell the dollar bears as the dollar has been in a 9-month downtrend despite massive FED & government massive stimulus). Even now the International Monetary Fund “IMF” is encouraging all governments to spend like drunken sailors “as much as possible”.  The TBTF bankers and investment banking establishments undoubtedly believe in this premise, because of their massive Keynesian qualifications and their commercial banking interests. They believe universally that inflation is mundane at best and under the complete control of the manipulative FED due to their biased bogus “fuzzy-math computations” in the CPI growing at less than 2%, giving the FED ample room for monetary expansion within their so-called dual mandate. Once the reflation Tsunami wave of liquidity starts these likeminded numb nuts believe that industry can begin to reinvest (they squandered extremely large amounts of rainy day funds these past 12+/- years on massive stock buybacks, and now they want and are demanding bailouts?) again with confidence when the Covid-19 pandemic is finally over. And with the savings rate having been boosted during lockdowns (far less to spend discretionary money on, and/or stimulus checks and enhanced unemployment), they believe that there is a massive wave of pent-up consumer spending to be unleashed.

The resurrection of economic pipedreams as Keynesian economic investment strategists and managers see the FED gently rising interest rates while returning markets to normality in the future, as economic recovery morphs into some significant sustained growth while national finances will return to an equilibrium balance and then turn into a surplus when tax revenues fully recover (I laughed when I think of this crap) as it is the same “BS” crap Keynesian argument of the 1960s [trickle “tinkle” down theory they embellish] resuscitated and repackaged for the 2020s. How many times have we seen and heard this before over the past 55-60 years as every turn of the credit cycle, the Keynesian argument fails only to return as the establishment’s major beacon of hope and prayers.

Inflation is No-Where to be seen due to massive distortions, fuzzy-math and down outright lying! Our Government statisticians have taken full advantage of this concept as they hedonically adjust, modify, and tweak the numbers to show that inflation is under control, they do this to reduce the burden of inflation compensation wrote into our government’s COLA commitments and other liabilities! It is a cumulative process that commenced soon after governments agreed to compensate their citizens for rising prices in the wake of the inflationary 1970s; I lived through that wild economic period.

Ø  John Williams at Shadowstats.com “someone I subscribe to” has meticulously reverse-engineered the changes in statistical method deployed by the US Bureau of Labor Statistics since the early 1980s to arrive at a figure for price inflation without such changes. The difference from official CPI estimates is astonishing. And if we look at the Chapwood Index “I also subscribe to this site” which covers the prices “of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities” we see that annualized prices measured in this manner have risen recently by an astonishing rate “much as 13.4% and at the least by 7.1%” several multiples of the official “BS” CPI data we are asked to believe in. Major cities also have high rates:

o   New York 12.7%,

o   Los Angeles 13.1%

o   San Francisco 12.8%.

o   With an arithmetic average across all 50 cities at 10.1%, this is extremely different from the CPI’s all items rate for 2020 of a paltry 1.4% now is it not.

o   The Chapwood Index shows an average annual inflation rate of 9.97% over all cities between 2011 and 2020 a 9-year period.

It is immediately obvious at least to me that the government version of inflation is the outlier, with Chapwood and monetary expansion confirming each other. The implication is that the US economy did not grow at all in official inflation-adjusted terms. Instead, it contracted persistently after adjusting for both price inflation. The mirroring of Chapwood and M-3 broad money as deflators suggests that there has been little modification in the general level of liquidity in the hands of consumers, otherwise they would show real divergences.

It becomes obvious why monetary policy planners need to believe the “BS” CPI statistics. Having set a self-serving ridiculous policy target of full employment consistent with a 2.0% inflation target, it is clear that on realistic figures interest rates are significantly suppressed. The central-banker planner’s ridiculous (JMHO) solution has been for Keynesian investment strategists, fund managers, and even foreign investors to be enticed into believing (made to believe) that price inflation is in reality extremely subdued and is no threat (I believe they are dead-wrong). But they have been willing the tug-of-war as that illusion and the bogus premise has been remarkably successful as they all now subscribe to a “Alice in Wonderland” fairy-tale that runs parallel to the world in which they exist. They are extremely frightened to admit their stupidity.

To bailout the wealthy, the corporate elite or to bailout the people, that is the question

 

I warned in September of 2019 that an economic breakdown was looming, and an economic crisis is exactly what we got [I never foresaw the Covid-19 aspect though); nevertheless 2020 was a “financial disaster” for over 55% of all Americans, this is likely one of the main reasons why so many Americans were/are seriously disappointed about the size of the $600.00 “stimulus payments” in the Covid relief bill that Congress just passed because this year has truly been a “great financial disaster” for millions upon millions of working class and poor Americans.  More Americans than ever before are just barely scraping by from month to month, and $600 is just not going to go very-far at all.  We have seen that small businesses have been getting massacred by the thousands, millions of Americans are in imminent danger of being evicted from their homes [If not for the eviction forbearance Biden Administration Announces Foreclosure Moratorium and Mortgage Forbearance Deadline Extension), interestingly more than 70 million new “initial” claims for unemployment benefits have been filed since the Covid-19 pandemic first started.  The U.S. for all intents and purposes has plunged into a very nasty economic cesspool-recession and most of the country is desperately praying and hoping that the government will do more to bail them out of this contagion.

The truth is that we could not afford another 900 billion dollar “stimulus package” on top of all the other “stimulus packages” that were already passed this past year but that did not stop Congress from their give-away bailout path. We were already $27.5 trillion dollars in debt, and all of this reckless spending is putting us on a likely nasty inflation path (but those in power the elite and wealth could care less) as Biden has just announced another preliminary bailout package valued at $1.9 trillion and he expect to follow that one with another $2.0 to $2.5 trillion) nevertheless most Americans do not really care at all that we are literally destroying our economy and finances. 

Ø  Most people are in desperate need of money, and the vast majority of them want “BIG” checks from the government as soon as possible. A OnePoll survey that was just released asked Americans about the current state of their finances, and that survey discovered that a whopping 55% consider this year to be “a personal financial disaster” ...That is over half the country!

Ø  And for those that are employed, that same survey found that 62% are planning to take on a 2^nd job in 2021 in an attempt to make ends meet...that is if they can find work at all! Among employed respondents, 7 in 10 say they need a significant raise at their job in order to make ends meet.

o   That number cannot possibly be correct, as America is the land of plenty for all! If you listen to the financial media cheerleading all is well and all will prosper!

Ø  Of course, there are not that many extra jobs to go around.  Already, there are millions upon millions of Americans that cannot find a “first job”. 

With so many Americans financially hurting, it should not be a surprise that millions of households are getting behind on their rent and mortgage payments! One-in-seven renters with family incomes from $35,000 to $100,000 were not current on their rent in November or December. The overwhelming majority of these renters in this income bracket almost 79% are expected to face eviction within two months. Similarly, 10.9% of U.S. homeowners with a mortgage were not current on their mortgage in November and December; and 56.1% of those homeowners expected they will be foreclosed on in the next several months. Congress of course keeps extending moratoriums on rent and mortgage payments [kicking the can down the road] and that has been financially devastating landlords like myself and mortgage holders like banks [but banks have NOT even come close to recognizing these looming loan-losses on their balance sheets JMHO). At some point the moratoriums will end, and when that happens, we are going to see a huge Tsunami wave of evictions that will be absolutely unprecedented in U.S. history (My opinion). Meanwhile, many Americans are going into the cesspool of massive debt in a desperate attempt to keep themselves afloat and in their standard of living financially! More than one-third of households with incomes between $35,000 and $100,000 have borrowed significantly from credit cards. Many debt payments will come due sooner than later burdening families that still suffer from long-term unemployment and under-employment and added health care costs related to Covid-19. This should mean rising credit default rates looming on the horizon!

Interestingly even at this juncture 2021 small business revenues are down more than 33% nationwide during the month of January; we are seeing that every day, more small businesses are closing their doors permanently.

Millions of American's hopes, and dreams have been severely crushed, and there is nothing that our politicians can say or do that will bring those businesses back to life (they were unable to become zombies). Unfortunately, if you are one of those Americans that have lost a business or a job this past year, then that would definitely qualify as a “personal financial disaster”. And as you have seen repeatedly in my writings supported with hard data and real surveys most of the nation is deeply hurting, and the road ahead is still littered with bouncing betties (landmines) and it could get become extremely challenging for many-many Americans! In the near-term, government “stimulus bailout payments” will definitely help financially strapped and suffering Americans. A national economic meltdown has begun, and our politicians are clueless about how to really attack it; they will try lots of things to mitigate the carnage, but most if not all of their “solutions” will only mitigate the contagions on a short-term temporary basis.

I read an article from the Aspen Institute; stating that approximately 12 million U.S. renters are “at least $5,850 behind in rent and utilities payments”, and the Aspen Institute is projecting that up to 40+ million folks could be facing eviction when the rent and mortgage moratoriums finally ends (and it will end). Unfortunately, there are no indications that this nightmare is going to end.  Last week, another 900,000 Americans filed new claims for unemployment benefits...while an additional 423,000 folks in 47 states filed new claims for what is called Covid-19 Pandemic Unemployment Assistance, the program created to help gig and self-employed workers who have been displaced. Prior to 2020, the all-time record for new unemployment claims in a single week was just 695,000, and that old record was set all the way back in 1982. We shattered that old record in 2020. But the real concern that many economic cheerleaders are ignoring is that at this point, the number of new claims for unemployment benefits have been above 695,000 for 45 weeks in a row (a terrible statistic). This significant unemployment crisis (does not even take into consideration the under-employed) has significantly hit working class and poorer Americans disproportionately hard.  Even FED-heads are being compelled to admit that the unemployment rate for low wage workers “is above 20%”.