WASHINGTON, April 24, 2016 – In our previous rant, we began to explore the observations of a French bank official, Albert Edwards with regard to our current almost-impossible-to-invest-in markets. Given that we’re writing this installment on Sunday, which, blessedly, is a day of rest from trading, it seems like a good time to wrap up both Albert’s and our own thoughts on what might befall stocks and bonds in the weeks and months ahead.
In our last episode, we concluded things in medias res with Albert’s fears of an ultimate market implosion as well as our own musings on the subject. Today, via the “Tyler Durden” authored ZeroHedge article where we first discovered Albert’s comments, we bring their observations and our own to a tentative conclusion. (Bold text below as per ZeroHedge.)
“We said in 2010 when the Fed launched QE2 that the ultimate outcome would be civil (or more than civil) war, so we thoroughly agree with Edwards’ ‘depression’ because sadly he is right, but since stocks keep rising, few others seem to care.
“All of which leads us back to Edwards’ bombshell windup and conclusion:
“‘I’m not really sure how much more of this I can take. So here we are 5, 6 or is it now 7 years into this economic recovery and it still remains pathetically weak. And so it should in the wake of one of the biggest private sector credit bubbles in history. The de-leveraging hangover was always going to be massive and so it is. Quick-fix monetary QE nonsense has made virtually no difference to the economic recoveries other than to inflate asset prices, make the rich richer, inequality worse and make Joe and Joanna Sixpack want to scream in rage. They are doing so by rejecting the establishment political parties and candidates at almost every electoral turn and seeking out more extreme alternatives at both ends of the political spectrum. And who can blame them apart from the chattering classes?
“‘I have just returned from Germany on a marketing trip. I absolutely agreed with their Finance Minister Schäuble when he blamed ECB loose money policies for contributing to the rise in the extremist right Alternative for Germany party. Schäuble, “said to Mario Draghi…be very proud: you can attribute 50% of the results of a party that seems to be new and successful in Germany to the design of this [monetary] policy,” And this is not just a German phenomena – it is a global one. The people are angry and they are lashing out. But central bankers have painted themselves into a corner with their overconfident rhetoric and monetary experiments. They have now committed us all to their road to perdition.’”
Durden offers his own observation to conclude:
“There is little more to add, suffice that all of the above explains the relentless thrust by the mainstream media to pain central bankers as nothing less than supermen…”
But the MSM sales pitch is starting to fail. The Maven has been preaching much of this doctrine since he began this column somewhere back in 2010 or so.
If you don’t believe any of what you’ve read here today and last Friday in this column, just ask yourself: why are so many formerly committed and passionate members of both American political parties ready to push with extraordinary vigor and passion the nomination of two utterly nonstandard individuals—Donald Trump and Bernie Sanders—to run against one another for the Presidency in 2016?
In the Maven’s view, average American citizens are and always have been genuinely reluctant to get involved in a bruising and perhaps violent battle against individuals or governments with whom they violently disagree. But when pushed too far, the long pent-up fury of the American proletariat and petit bourgeoisie (or what’s left of them) has historically been unstoppable. (See World War I and World War II for details.)
Intentionally unnoticed and ignored, the citizens of Flyover Country have lost their generally middle class jobs in massive numbers, never to regain them again. That includes countless lifetime union members who see with remarkable clarity that a high percentage of their union dues are going to support the party that’s actively killing their jobs: the Democrats. They are not blind, nor are the members of that legion known as the former middle-class.
All these forgotten citizens are now the ones clamoring for either Bernie Sanders or Donald Trump. Both candidates are two sides of the same coin. The growing number of voters who support either candidate are apoplectic. They are so furious at the Federal government, the mega-wealthy, and the majority of politicians in both parties that they want either Bernie or The Donald in the White House on January 20, 2017.
They know full well that Bernie’s only plan is to steal from “the rich,” since that’s what socialists do. Yet why should they care when they know “the rich” have been pilfering middle America’s future for decades by buying off (mostly Democrat) politicians.
They also know The Donald is a two-fisted bull in a china closet who, at the very least, will spend four years lashing out at any rich clown or politician he doesn’t like, perhaps bringing the whole rotten political edifice down in the process like a latter-day Samson run amok. Why should the voters who support these candidates care? None of our current massive kleptocracy is working for them.
For the bulk of Americans, their way of life is imploding, thanks to arrogant, rich, virtue-signaling Democrats who’d rather worry about sugared soft-drinks, personal pronoun choices and bathroom designs to irritate and punish the majority of this country’s patriotic and/or religious yahoos rather than actually respond to the people who’ve elected them as their “representatives” in Washington.
Likewise, wimpy, astonishingly stupid and cowardly Republicans are just as massive a problem for our flyover yahoos. The GOP offers nice words and no help. No guts and no glory. They preach a good “conservative” game, even as they are reluctant to halt or even control the economy- and nationality-destroying immigration stream flooding over both America’s and Europe’s borders.
Like the Democrats and their patrons, most Republicans and their patrons (mainly the Chamber of Commerce) support the continued flow of illegal aliens and concurrent amnesty for all, the better to change voting patterns while suppressing forever the desperate wage demands of real American citizens. All this, added to the utter refusal of nearly all politicians to grasp the seething fury of the 2016 American electorate does not augur well for the future.
Whether they succeed in winning the prize or not, Bernie and Donald are the masses’ twin warning shots across the bows of crony capitalism and crippling Federal bureaucracy. The Federal government already knows this, which is why the Obama Administration is desperately trying to eviscerate the Second Amendment and why the Department of Homeland Security (DHS) is loading up on armaments. They’re preparing to use their growing arsenal not against ISIS and state-sponsored terrorists. They’re preparing to discharge those weapons on American citizens when they finally revolt.
This is no paranoid fantasy. A little over two decades ago, the terrifying Berlin Wall fell almost overnight, due to an almost joyous (and unopposed) onslaught by legions of unarmed young people. Almost as swiftly, the great, nuclear-armed Communist monolith known as the Union of Soviet Socialist Republics shattered about utterly, with most of that implosion effectively happening in less than a month.
It’s likely only a matter of time in the U.S. Even now, the inevitability of a revolutionary confrontation can still be avoided. But both political parties are going to have to wake up. And soon. We’re not particularly hopeful. The East Germans and the Soviet Communists had no clue until the walls came tumbling down. They never saw it coming. Washington today is behaving just the same.
The government today, particularly Congress, is in shambles. Central banks have taken the money part of this game about as far as it can go. The Federal Reserve is pretty much out of weapons, save for confiscating America’s 401(k) plans and IRAs to pay for what they can’t pay for. If the current situation persists much longer, all official credibility will be shot and the stock market could tank like never before as a result.
Today, it’s the fear of this future chaos that keeps free enterprise—or what’s left of it in the U.S.—from making the vital investments we all need them to make in order to pull this country and many others out of the political and moral muck. That is precisely what we’ve been arguing in this column for roughly six years. Durden and Albert are on board with this notion and have framed the issue with great force and clarity.
There’s another way to change things, of course. It’s traditionally called a revolution, though even now it’s a revolution that no one wants. But the longer our political impasse continues, the nastier that revolution will be when it finally erupts into Robespierre Time. Such a cataclysmic event would be the most horrendous internal implosion history has ever witnessed.
With regard to the markets, the pundits and smart guys can bleat and lie all they want. But we strongly suspect that neither we nor Mr. Market are alone in fearing that worsening political chaos in the near term is a likely outcome.
All this, we think, is at least partly why we can’t decisively break through the 2014-15 stock market top. Just as occurred in the early 1930s, the average American’s “belief” in the system is hitting an all time low. This is currently reflected in our aimless, yo-yo, rumor driven markets. That spells serious trouble ahead, leading nervous people, already once-burned, to disinvest, stuff money in mattresses, hoard gold, and stockpile ammo, food and supplies.
One thing we predict with confidence: It’s going to be a long, hot summer for professional politicians in both current camps, and the outcome of the summer conventions and fall campaigns remains highly uncertain.
Let the blow-dried financial pundits bleat away about this “reason” or that one behind the latest market moves. Governments and the elites who control them are slowly losing their grip. Everyone knows this except them. And that’s what’s made stocks and to some extent bonds a permanent trader’s market based on fake numbers, fake smiles and few supporting facts at all.