The banquet of effects is being served, and risk-off crashes are, like revenge, best served cold.
The ideal setup for a crash is a consensus that a crash is impossible– in other words, much like the present: sure, there are carefully measured murmurings about a “correction” but no one with anything to lose in the way of public reliability is requiring an honest-to-goodness crash, a genuine crash, not a wimpy, limp-wristed dip that will immediately be bought.
What I’m requiring is a rip your face off, weeping bitter tears over the grave of the speculative wealth that you thought was permanently crash. All those purchasing the dip since the Fed will never ever let the marketplace go down will be squashed like scampering cockroaches and all those attempting to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Whatever Bubble pops, well, everything pops. There is no shelter in a risk-off waterfall.
The crash is coming as a result of several equally strengthening characteristics, the first being that no “severe individual” thinks a crash is possible, much less impending. In no specific order, here are a raft of other causally consequential triggers of a cascading market crash:
1. As I kept in mind in my require the top, Is Anybody Willing to Call the Top of the Whatever Bubble? (September 6, 2021), there is no history to support the extensive confidence that the extremes of over-valuation, take advantage of, euphoria and speculation last permanently, or even much longer than the life expectancy of a cockroach. We’re well past that standard into extraordinary madness. So what happens next: squish.
Just for the record, the Dow peaked on August 13, the S&P 500 topped out on September 2 and the Nasdaq topped out the day after my call, September 7. (Close enough for gummit work …)
2. The reliability of the Federal Reserve remains in the dumpster, which just ignited. As I explained in The Fed Is Fatally Corrupt– Therefore Is the Rest of America’s Status Quo (September 10, 2021), the Fed is corrupt on several levels– thoroughly, totally corrupt, therefore are all its minions, proxies, apparatchiks, toadies, apologists and lackeys.
This is lastly dripping through the Fed corruption containment vessel as even the lackeys in the billionaire-owned business media are now afraid of losing whatever tattered shreds of credibility they still have by declining to acknowledge Fed corruption, over-reach and hubris. And so at long last, the Fed no longer walks on water. The Fed’s fraudulent travesty of a mockery of a sham scam has lastly breached the three-foor thick containment walls and the putrid stink of Fed corruption can no longer be shut in.
Like any excellent kleptocratic Politburo, the Fed cashiered the 2 most indefensible scapegoats to divert attention from the similarly corrupt incumbents commanding the collapse of Fed trustworthiness. Do not be shocked if the scapegoats are airbrushed out of main pictures, per formally authorized propaganda.
3. As I detailed in The U.S. Economy In a Nutshell: When Vital Components Are On “Indefinite Back Order,” the Machine Grinds to a Stop and Sorry, Fed, Inflation is Currently Embedded, the fuel of the inflation rocket has just ignited and the unaware, corrupt Fed is seeing the boost stage in abject, humiliating confusion, as the Fed is now entirely helpless, having actually blown the chance to get ahead of the curve by reducing their making billionaires richer “stimulus” a year ago.
Inflation is not just embedded, it’s worldwide. Natural gas costs might triple in whole regions without even breathing hard, and the costs of other fundamentals could simply as quickly triple without breaking a sweat.
Inflation squashes risk-on speculative markets like, well, scurrying cockroaches. Squish.
4. The Fed has actually lost control of yields. All of us know that phonies expose their dishonesty via micro-signals, and with this is mind, slow down the video of Fed Politburo speakers, starting with Chairperson Powell. Wealth inequality skyrocketing? It’s not our doing! etc.
. Oops, the feline runs out the bag: the Fed has actually lost control of yields. Trust in the Fed’s god-like powers is fluctuating, as punters and gamers understand the Fed’s shuck-and-jive has actually finally lost its power to wow the greedy and the credulous.
Increasing yields squash risk-on speculative markets like, well, scooting cockroaches. Squish.
5. China is not “saving the world” this time. As I described in What’s Truly Going On in China (September 23, 2021), China has other fish to fry and it isn’t bailing out global markets as it performed in previous bubble pops. Squish.
6. The increasing US dollar is Kryptonite to speculative markets, emerging market debt and risk-on euphoria. Sorry about that, however you understand what happens next: Squish.
7. The retail bagholders are now all-in. As I noted in Please Don’t Pop Our Valuable Bubble! (September 8, 2021), the retail punters have lastly gone all-in on the “this bubble will never ever pop” Everything Bubble. As I observed in August, The Smart Money Has Currently Sold (August 18, 2021) as the retail bagholders have actually poured more cash into the Everything Bubble than they performed in the past decade or more.
This is of course the most trustworthy signal that a bubble is about to pop. Sorry about that: squish.
8. The purchase the dip crowd has actually been so well-trained that they will provide the needed buying to keep the waterfall from gathering too much momentum. A stairstep down that sucks in buy the dip buyers is perfect for those benefiting from the decline. To begin with: a rally to close the quarter favorably to make it appear that every money supervisor beat the index funds. And so on.
However the net result is still: squish. Effects can be delayed for rather a long time, but the rot beneath the machinations only enhances the eventual collapse.
The banquet of consequences is being served, and risk-off crashes are, like revenge, finest served cold.
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