Good times are here again! In watching the financial game shows and looking at the “markets” you could get that feeling- if you had no clue about what ACTUALLY is happening.
Many numbers can be manipulated to make terrible numbers actually look good with seasonal adjustments, government spending, and changing the way the “numbers” are calculated. A couple of examples would be changing the food basket to have cheaper items to replace the original more expensive items so inflation can be reported as lower than it actually is. Another would be changing the way the unemployment rate is calculated. Hey- if 99 MILLION working age adults can just magically disappear from the unemployment rolls then unemployment is at near all-time lows. REALLY? Look around!
The US stock “markets” have put on an impressive gain this week. Many people associate a rising market with a good economy. Under normal circumstances they would likely be correct. Under the circumstances we have today there is no correlation between the totally manipulated “markets” and the underlying economy which is collapsing. No wonder so many people are confused.
Keep in mind that a Goldman Sachs trader came out and said that this short squeeze has legs. What he meant was that the most shorted stocks were up 5% just this week. Basically, shorts have to buy back the stock they borrowed to cover their positions and it causes a short-term rise in those stocks involved.
I also think it is important to understand that the S&P is a group of stocks that many associate with the overall US market. There are 500 stocks in this index. Since this is a market that is based upon the size of the company in the index the larger companies have a more direct influence on the movement of the entire index. If the top 7 companies were removed from the S&P 500 at the end of October, the “gains” would be slim to none. That means that 493 of 500 companies overall are flat. Even this is an illusion.
Some things cannot be faked and can give us a heads-up as to what is actually happening.
Take for example:
- California- yes THAT California which is collapsing into the crime and homelessness capital of the USA. According To Bloomberg TAX RECEIPTS were expected to be $42 Billion in October but -oops! They only received $18 BILLION as of October 25. Could it be that the 342,000 people who left California in 2022 were, in more than a few cases, high earners that they count on to pay the ridiculous taxes? They are not alone in this situation.
- Commercial Real Estate is in BIG trouble. According to a report by Trepp (Real Estate Co.) there is a surge in industrial CMBS delinquency rates. This is in addition to the rising delinquencies in office towers and they even report that there has been an uptick in multi-family CMBS delinquencies as well. As I reported a few weeks ago office tower values in San Francisco and Baltimore have already collapsed.
- The US Treasury has to be re-funded by the Fed to the tune of over $700 Billion (Greg Mannarino)
- Even though the inflation rate is grossly underreported with some slight of hand people are well aware of prices rising relentlessly. We have been given a slight reprieve because of the lower price of oil but inflation is still rising even with that bit of help. How long will THAT last?
- The price of gold is threatening to move over $2000.00 per ounce. It has been there but magically, right before the close last Friday a magic wand was waved, and gold dropped just below $2000.00 to make sure that there was never a month where gold ended over $2000.00. My guess is that a close over $2000.00 would have led to algorithms buying. That would not be good for the central banks who are still at it- buying it all. According to the World Gold Council, in its 3rd. quarter report, central bank buying maintains a historic pace. Quarterly gold demand was 1147 TONS- 8% ahead of its 5-year average. WATCH WHAT THEY DO- NOT WHAT THE SAY.
- Debts and deficits are exploding higher, which is a clear sign that we are conjuring up cash out of nowhere to pretend our economy is actually ok. It is like a person on life support where all of the vitals look great- as long as the machine does the breathing. If the machine were turned off the vitals would cease, and the patient would die. I believe our economy is in just this situation. When debt is counted as growth and GDP is only rising because of government spending- and DEFICIT spending at that- we are nearing the end game.
- Many pension plans are massively underfunded and that is with stock and bond “markets” being artificially inflated by central bank “printing and buying” of these assets. What happens when we have a real correction? Many may ask- what if they don’t allow a correction? Good question. Keep in mind that they can’t just wish prices higher. They have to conjure up the cash, buy the assets and continue doing so with exponentially higher numbers to keep the bubble inflated. While the “promise to pay a certain amount” may be kept the actual VALUE of that promise is likely to be greatly compromised. This means you may get paid what you expect but you probably didn’t count on paying a hundred dollars or so for a happy meal. What if they stop? We can all be pretty sure that those “promises to pay” will be broken or at least greatly reduced.
- Freight companies are going bust. Green energy projects are collapsing all around us. Mandates from the government are causing problems with energy production and our electrical grid- at the same time they want more mandates for electric cars.
We cannot have a prosperous, functioning economy without access to at least fairly priced energy. It also has to be readily available when needed for use by public or private entities. Higher prices for business is a direct tax on all of us as the consumer bears the brunt of rising prices in the end.
We have reached a point where there are no good answers. If we allowed the “markets” to correct after the 2008 meltdown we would likely be on a path to a sustainable economic recovery by now- or possibly already be prospering again. We would have had to endure a few rough years but since the beginning of time there have been booms and busts- years of abundance and lean years. The central bankers, however, have their own plan. Lately, they are the purveyors of booms and busts, and it appears that they do it to benefit themselves.
#1 Inflate an asset bubble with low interest rates. This causes prices to rise and causes many to go into debt to participate.
#2 Raise rates and collapse the bubble. This leads to defaults and allows the banks- which issued the loans to foreclose and own real assets for “money” that was conjured up out of nowhere and has no real intrinsic value- like a hard asset like real estate, energy, gold, etc.
#3 The banks own a LOT of assets that were “earned” by doing nothing more than a few clicks on a mouse where many hard-working people lose it all because of it.
#4 Don’t forget the OWNERS of the Fed- which is neither Federal- and has no reserves- are the major banks.
Thomas Jefferson warned us of this over 250 years ago.
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