What The Hell Did You Expect?

Monday, August 5, 2024 headlines:

GLOBAL STOCK MARKETS ROCKED

DOW -900

CALLS FOR EMERGENCY RATE CUT

U.S. STOCKS PLUNGE AS RECESSION FEAR TAKES HOLD

Is the anticipated market correction finally here? After two minutes I turned the TV off, not interested in their hysteria.

My broker’s servers were overwhelmed, couldn’t log in. Gold had a quick “Blue Light Special,” down over $50/ounce. When I finally logged on, I was pleasantly surprised.

The Dow closed down 2.6% and the S&P 3%. Gold ended down $17.70 (0.72%). Our portfolio was down 1.72%.

For me, this time is different

I’m not going down this road again; second-guessing, coulda/woulda/shoulda, full of fear and a knot in my stomach. No panic, just grinning!

Scrolling through my 54-page quote inventory for my daily Facebook post, this one stopped me cold:

“Those that fail to learn from history are doomed to repeat it!” — Winston Churchill

I follow the markets closely, am I finally catching on? As a retiree, I have to manage our life savings carefully. We can’t afford another Fed surprise like 2008.

Former colleague Doug Casey cautions, “Just because something is inevitable, does not mean it’s imminent.”

I stared at my computer screen and said, “What the hell did you expect?“

Pundits explain the event was triggered by the Sahm Rule. Wikipedia explains:

“Sahm rule recession indicator, is a heuristic measure by the US Federal Reserve for determining when an economy has entered a recession. It is useful in real-time evaluation of the business cycle.”

The next few days were filled with pundits arguing over technical details. I believe Chuck Butler who explains:

“Wall Street economists are in utter denial of the idea that a recession is coming… several economists and equity strategists believe that while the risks of recession have risen amid weakening economic data, the last few days of market action have been an overreaction…. Really? Have you not noticed that these bad economic prints have been building momentum? Apparently, not!”

Be forewarned – You should expect terrible consequences after 15 years of negative interest rates.

History

Soon after the Repeal of the Glass-Steagall Act, the casino banks began writing high-risk loans, labeled with improper credit ratings and peddling them to unsuspecting investors. High-Risk derivative exposure was beyond imagination.

Famed investor Michael Burry warned the loans were too risky, predicted a collapse, and was ridiculed. August, 2023, CNN reported:

“Michael Burry, the ‘Big Short’ investor who became famous for correctly predicting the epic collapse of the housing market in 2008, has bet more than $1.6 billion on a Wall Street crash.

Burry is making his bearish bets against the S&P 500 and Nasdaq 100, according to Security Exchange Commission filings released Monday.

…. Burry is using more than 90% of his portfolio to bet on a market downturn, according to the filings.”

He’s betting big bucks that “inevitable” and “imminent” are getting close.

In the movie, Burry knew the casino-banks were in trouble and appeared shocked hearing, “There’s gonna be a bailout!” Casino banks gambled and lost. Deemed “too big to fail,” the government forced taxpayers to bail them out with trillions, despite public outcry….

Government Meddling

Here’s John Mauldin’s reaction:

“Why is it that we believe 12 human beings can sit around a table and decide the price of the most important commodity in the world—interest rates on the world’s global reserve currency. The market is perfectly capable of setting that rate on its own.

It is the hubris of man,…who think the economy needs managing by wise and thoughtful people…. It’s the whole elite thing I write about.”

Discussing the Fed’s dismal track record:

“…. In the past, the Fed has seriously disadvantaged savers and favored large businesses …. This (negatively impacted) income and the economy for the lower 80% of Americans.

…. This is damn serious business. …. (A) regulated market can create stagflation and worse outcomes, not to mention cronyism and the unintended consequences of rates that are set too low. Living in the real world, we are forced to live with 12 people setting the price of money.”

Consequences may be unintended, but they damn sure should be expected. When the Fed cut interest rates, cronyism reigned supreme. The top 1% saw their share of the pie increase while much of mainstream America saw their pensions and 401k programs shrink. The Fed shrugged it off as “collateral damage.”

Monday, August 5th, (vacationing) pundit Jim Kunstler rants:

“And Suddenly Things Change

That two-by-four upside our country’s head you’ve been waiting to get whomped with? Looks like it’s landing now.”

Referring to the 2008 bailout:

“…. Treasury Secretary Hank Paulson and Fed Chair Ben Bernanke came in like a code blue squad and hooked up the banks to an IV-drip speedball of cocaine and heroin, i.e., “money” that didn’t actually exist (a.k.a. “liquidity,” hallucinated capital), and that crew kept it coming for years.

And then Janet Yellen and her posse kept it coming with never-ending zero interest rate policy (ZIRP) until the national debt canceled America’s future. And left Jerome Powell pretending there was a way out of this doom-loop.

…. And everything since then has been a waiting game. The financial world was in hospice.

The wait is over.”

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History in plain sight

I recently wrote about Presidents Kennedy and Reagan’s attempts to “stimulate” the economy. The cornerstone was putting more money in the hands of the people by cutting taxes, creating investment incentives, lowering interest rates to make borrowing easier, all creating jobs. Good economic times soon followed.

What has changed since Kennedy and Reagan? The repeal of Glass-Steagall, the Fed’s owners, the casino banks, control the majority of the wealth of the nation, and their level of risk is unprecedented.

The Fed is owned by the casino-banks. 12 Fed heads want the public to believe they are diligently at the helm, navigating through difficult waters and all is under control. Reality is you have a bunch of think-alike Keynesians, conducting economic experiments, playing whack-a-mole, hell-bent on preserving bank profits. The public, not the banks, are left with a headache and suffering the consequences.

The process isn’t new…. Jeff Thomas explains:

“‘The Bank Was Saved, and the People Were Ruined.’

…. William Gouge, commenting on the Panic of 1819. The panic had been caused when the First Bank of the United States had first expanded the money supply dramatically by offering loans, then contracted the money supply by tightening its requirements for new loans, causing a crash.

This is a useful quote, as, in its simplicity, it states the very nature of crashes brought on by irresponsible banking practices. In every case in which this occurs, it is possible through the complicity of the government of the day.”

Neutral Rate of Interest

The Brookings Institute explains:

“The neutral rate of interest is the short-term interest rate that would prevail when the economy is at full employment and stable inflation: the rate at which monetary policy is neither contractionary nor expansionary. …. (It) can only be estimated.

…. It affects how the Fed judges whether the interest rates it sets are stimulating or restraining the economy.”

There have been five reported recessions since 1970.

When the economy is not at full employment or stable inflation the Fed takes a whack, adjusting the interest rates. Each time the fed raised rates, inflation came down, whack-whack-whack …. the economy slowed for a few quarters and we experienced a recession.

In 2008, the Fed made a GIANT WHACK, bailing out the “too big to fail banks.” Cheap money, well below the neutral rate, flooded the system for 15 years. The disastrous “collateral damage” side effects were immediately felt by savers, 401Ks and pension funds. Many baby boomers saw their retirement dreams go up in smoke, having no choice but to go back to work.

More side effects …. corporations borrowed cheap money, to pay extra dividends and buy back their stock, benefitting their executives and Wall Street; the 1% loved it! Rolling over this debt at current interest rates will sink their ship. Government, spending using borrowed, “hallucinated” money, skyrocketed the deficit to over $35 trillion. As Kunstler said, “the national debt canceled America’s future.” What the hell did they expect?

The Fed could no longer ignore inflation and began whacking away to keep our currency from collapsing.

At the first hint at a market collapse, the 1%, Wall Street banks, “hooked to an IV-drip speedball of cocaine and heroin, i.e., “money” that didn’t actually exist (a.k.a. “liquidity,” hallucinated capital)” are screaming bloody murder, they need a hit, begging the Fed to do something. FED – Don’t pick up your hammer, put the addicts in detox.

What the hell did you expect?

Another money injection will shoot inflation to the moon and the collapse will be epic.

Chuck Butler cautions:

“Wall Street economists are in utter denial of the idea that a recession is coming…the last few days of market action have been an overreaction…. Really? Have you not noticed that these bad economic prints have been building momentum?”

Chuck also suggested reminding readers, “Historically, stocks do NOT perform well in a recession. Ignore the recession fears or heed the warnings and adjust your investment portfolio, your choice!”

A reasonable expectation is a recession. Those who understand history are taking profits, patiently waiting for real “Blue Light Specials.” Stock from some damn good companies will eventually go on sale, no matter how much the Fed whacks!

Help keep us online! I love it when readers thank me for “telling it like it is” for providing content they won’t find in the mainstream media. I’ve been sent to Facebook purgatory a few times – they didn’t approve. Free speech isn’t appreciated in all circles. When I started Miller On The Money, I vowed to keep our newsletter FREE! I’ve kept my promise – our weekly letter is an expensive hobby. Donations are our primary source of financial support, and what keeps us going. We don’t peddle your name to anyone. I’ve turned down proposals from advertisers, feeling their offerings were inappropriate for our readers. Readers pitching in to help offset our cost are much appreciated. It’s strictly voluntary – no pressure – no hassle! If you want to help, click the DONATE button below. You do not have to sign up for PayPal to use your credit card. And thank you all!

On The Lighter Side…

Thanks to all the kind readers who wrote in last week. I don’t recall ever getting such a large, positive response to any article I have written. Some suggested it should be required reading by all members of Congress.

Feel free to forward our articles to anyone you feel would benefit. I’d suggest some aspiring politicians, versus the career politicos, might pay more attention. As a personal favor, encouraging friends and family to sign up helps a lot.

Monday, a week ago, we took our son Dean out for dinner. By the time we got home, my throat was on fire. I ignored it for a couple days and finally went to the doctor and was diagnosed with strep throat. I had it when I was a kid and ended up with rheumatic fever.

After my treatment for tongue cancer in 2019, swallowing is very challenging and this made it worse. Had to revert back to milkshakes. I was flattened. I’m on antibiotics and feeling somewhat better. Finally, on Friday I was able to eat ½ of a peanut butter and jelly sandwich. It took 30 minutes, with the assist of 16oz. of soda, to finally eat three McNuggets for dinner. As I tell others, no matter how slow, progress is progress, and each small step should be recognized as a victory. A reminder of what it was like right after finishing my original chemo/radiation treatment.

Sometimes stubborn replaces common sense. I knew doggone well the next day I should go to the doctor, why did I wait? Serves me right!

Quote Of The Week….

“Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by fiscal policies of statist governments.” — Ayn Rand

And Finally….

Friend Snow C. shares some clever senior remarks for our enjoyment.

• Age is merely the number of years the world has been enjoying you.

• My parents had an old black and white TV. I was the remote.

• Don’t try to put me in a home, I’ll put you in the ground.

• I’ve reached the age where my brain goes from “you probably shouldn’t say that,” to, “what the hell, let’s see what happens.”

• You know you’re old when an “All-Nighter” means not having to get up to use the bathroom.

• I was recently told, “You don’t look your age.” I didn’t have the courage to ask if that was a compliment or something else. It’s a sure sign you are getting old.

• When I need to change a ceiling light bulb I wait until the family is here. I get out my tall ladder and immediately I get plenty of help.

• 𝒮𝑜𝓂𝑒𝒹𝒶𝓎 𝓌𝑒 𝑜𝓁𝒹 𝒻𝑜𝓁𝓀𝓈 𝓌𝒾𝓁𝓁 𝓊𝓈𝑒 𝒸𝓊𝓇𝓈𝒾𝓋𝑒 𝓌𝓇𝒾𝓉𝒾𝓃𝑔 𝒶𝓈 𝒶 𝓈𝑒𝒸𝓇𝑒𝓉 𝒸𝑜𝒹𝑒!

And my favorite….

• If you haven’t grown up by age 50, you don’t have to.

Until next time…

Dennis Miller

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken

 

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