Bubble II - A Deeper Dive

I noted the five phases of a bubble in the last post. 

Let's take a brief look at a few classic signs that a stock market bubble is about to burst: 

i) Few Advancers: the phenomena of a rising stock market led by very few stocks, meaning most of the market is actually flat or declining; and, 

ii) Smart Money: the spectacle of the "smart money" getting out - the essence of the fourth or "Crisis" phase of a bubble.

Regarding the first phenomena, this is easy.  

Last year six companies - Yahoo, Microsoft, Netflix, Amazon, Apple and Facebook - accounted for 99% of the net gain in US stock markets. Don't look for this to happen - we are already there. The market is only being kept up by corporate buy-backs aided and abetted by the US Fed.

Regarding the second phenomena, watch for any sign that the Buffets and Dimons of the world are selling shares. No matter what reason they give for selling, when they start selling then you need to be selling too.

And when they start selling, you will be hit with a bombardment of idiotic propaganda telling you to stay in no matter what! For example, see many articles and commentaries on CNBC now!  

Aside - if "you can't time the market"...then why has the smart money done precisely that, again and again throughout history? Answer - Because you can, that's why! 

Consider that in 1929, most of the smart money got out just before the crash...Joseph Kennedy literally a few weeks before it happened.  

If you see the big players selling, we will be very close. Ignore the propaganda this time....

"The Swindle Continues..."

Bubbles!!!

I think we are near the end of a business cycle and primed for a crash. This cycle has been driven by the greatest injection of new money into world economies in human history. Adding liquidity like this is bound to cause asset bubbles – in stocks, housing, and existential stuff like fine art and cars purchased by rich people with too much cash. To illustrate why I think this is almost the end, please consider the following.

Asset bubbles go through five phases…

1. The Change – there is a beginning based on things like a new technology; new money flowing into the economy from previously unknown investors; the development of new management techniques that drive efficiencies etc. The Smart Money sees these changes, and invests.  

2. The Build Up – the value of companies that are part of The Change rise through the normal course of investment with investments tied to actual profit growth and other rational barometers like the expansion of market share. As these companies rise, confidence grows and the entire market follows suit. Astute average investors and professionally managed money is invested here.

3. The Euphoria – the value of companies and the price of their shares become divorced from anything rationale as share prices rise seemingly without limit. For example, in the 1990’s people started talking about The New Economy based on the Internet, forgetting that companies in this new world still had to make money. The main way to gauge the value of a company ion the stock exchange is the P/E ratio – price of the shares over the earnings per share.  A healthy company with normal valuations – like a bank – should have a P/E of about 15. A quickly growing company with loads of upside should have a P/E of about 30.  At the height of the High Tech Bubble, Nortel had a P/E as high as 124. This was an insane level, that screamed that the stock would eventually crash – and it did, falling from $124 a share to $0.67 a share (…yes, you read that right – the price fell to sixty-seven cents a share from $124 a share).  Neflix’s P/E today is…..124. In the Euphoria, unknowledgeable people who believe the BS about “New Economies” etc., pile in so that they don’t miss out!  They are more commonly known as “Suckers”.

4. The Crisis – once it becomes clear to some that the share prices are divorced from financial reality, especially for companies that lead The Change, the Smart Money starts to cash out. This causes the prices of these companies to fall.  The Suckers keep buying with every drop in share prices seen as a “new buying opportunity” or “new entry point” utterly divorced from any actual analysis. The result of these sales and purchases are massive swings in the prices of these stocks, which is matched by wild swings in the value of the overall stock market. The S&P 500 has moved up and down by an average of about 8% six times in a year and a half. This is not normal.   

5. The Collapse – when it becomes clear to everyone that stock prices are divorced from financial reality, the market falls dramatically. This can be anywhere from 20 – 60% in a short period of time. Some of the companies that started The Change will go under at this time – they were only ever a fantasy. With the Smart Money long gone, only the Suckers get killed as they try to sell in a collapsing market.  Professional managers keep money in at this point telling their investors to “hold for the long run.”

This process of bubble and collapse is usually hastened by corruption and malfeasance that seems to underpin every bubble. You never really know what corruption that helped drive a bubble was until the bubble has collapsed, as it is the collapse itself that starts the real enquiries and audits. Think Savings and Loans in the late 1980s, and Enron, Madoff, and subprime mortgages in the mid-2000’s. Next time, I think we will discover malfeasance in stock buybacks and manipulation of options (…companies buying their own stock in the stock market to pump the price – they bought back $1.1 TRILLION in their own stocks in the USA last year, and $50 Billion in Canada – then managers blow out their options at the higher stock prices…), and corporate bonds which I think are mostly based on nothing but predictions of forward earnings that will never happen. We shall see.

Why does this matter for you?

If we are at the end of a cycle, it is time to think about asset preservation not about making more money. Given the wild movements in the S & P 500 over the last 18 months, I think we are in The Crisis phase of a stock market expansion. No one knows when The Collapse will come, but it will come.

Note – commentators are saying that Trump’s trade war with China is responsible for the latest market woes. These same people conveniently ignore the massive injection of cash into the markets courtesy of corporate buy backs, without with the markets would all be in the red. Reality is that real confidence is not shaken by trade wars, nor does it need a back stop of hundreds of billions of dollars’ worth of buy backs.

Suggestion - you may want to meet your advisor and lighten the amount of your cash that is exposed to the stock market, and move it to something like “Money Market Funds” which basically buy super safe bonds. You won’t make any money doing this, but you won’t lose any either. I don’t give advice that I would not follow – I have had my professionally managed cash in these super safe funds for almost three years.

If you want to short, please see HFD on the TSX which is a 2 x inverse play on Canadian banks whose debt has been downgraded twice in the last three years owing to concerns about Canada’s housing bubble. 

Do your own do diligence! 

Mueller and Fusion GPS

Mueller has testified. 

In spite of a new low in the world of American political theatre, where Republicans used Russian-inspired propaganda to accuse a Vietnam war hero, military volunteer, and life-long loyal Republican public servant of trying to launch a coup against the Trump Presidency, he did his job and stuck to his script, which is his report.

At one point, he was asked this...

"When you talk about the firm that produced the Steele reporting, the name of the firm that produced that was Fusion GPS. Is that correct?”

His answer was “I’m not familiar with that."

The next thing said to him was this...“It’s not a trick question.” 

To which Mueller responded as follows...“This is outside my purview.”

Right-wing pundits have stated that this is proof that Mueller did not know what was going on with the investigation because he did not even know about Fusion GPS, and that this is therefore proof that his investigation was a "witch-hunt". They also allege that he should have looked at the Steele Dossier because it alleged collusion, and his failure to do so shows his investigation is flawed as it missed looking at all that evidence.

Let's look at these idiotic claims one by one.

By saying that "THIS" is outside his purview, Mueller was signalling to the Republican scumbag who was questioning him that he knew full well what "THIS" is, otherwise how could he say that it was outside of his purview? As with all of his other testimony, he stuck rigidly to his report - to what is actually in his "purview".

Here is news for the Republican scumbag who asked this question - Fusion GPS and the Steele Dossier have NOTHING to do with Mueller's report, either in its content or in the origins behind the investigation itself. This is crystal clear from the first few pages of the report itself.    

As well, the Republican scumbag who asked these questions likely knows full well that Fusion GPS and the Steele Dossier have nothing to do with the investigation - the scumbag was just playing a role in the sad passion play that is America. 

On that, I invite readers to search the PDF version of the report in full - the terms "Fusion GPS" and "Steele" do not appear anywhere.

Again - this is political theatre at its lowest, where even resort to a propaganda script that originated with the Russians is considered fair game when it comes to trying to score political points.

Mueller is not an idiot. If he had engaged this utterly disgraceful line of questioning which was clearly designed to lead to an accusation that he led a Clinton-sparked "witch hunt" to overthrow Trump, he would have lent credence to this total bull shit. His answers were designed to cut off that line of questioning before it even started, which he did accomplish.

As also noted, he has also been accused of having conducted a limited investigation because he did not look at the Steele Dossier which includes claims of collusion.  

No one making this accusation is actually interested in getting to the truth of Russian interference in the last presidential election. Like Mueller, they know that the dossier has been widely discredited, except to the extent that anyone tied to it can be accused of being a Clinton hack - so he paid no credence to it at all, so as to not tie his investigation to it in any way shape or form so he could not be accused of being a Clinton hack.  Again - the man isn't an idiot.

Oh, and on that, those pundits who now say he should have looked at the Steele Dossier in order to conduct a full investigation are the same people who two years ago were saying the dossier was 100% bull shit.  

So which is it?  Is it total bull shit, or is it actual evidence of collusion - it can't be both.  

Do you see the utter shamelessness in this?

To score points today, the dossier is now said to be real and Mueller should have looked at it as if it contained actual evidence. That he didn't apparently suggests that he is corrupt. 

To score points yesterday, these same people claimed that it was a total lie designed to set up Trump, who won the election fair and square and who is a good if misunderstood man. 

To those esteemed pundits, I say "F&^% Y98!."

Mueller had one main message - Russia usurped the last US presidential election, and this remains a clear and present danger to American democracy. There is no question that his report shows this. 

He is wrong in this. The greatest threat to American democracy now consists in how politics is conducted in that country, where even disgraceful conspiracy theories which have their origins in the machinations of America's enemies may be resorted to in order to score political points.

The So-Called "Moon Landing"

The “moon landing” has come up in conversation this week.  I  would like to clear things up regarding this issue, so here it goes…this what actually happened….

What were you doing 50 years ago?  Do you remember?  I sure do!

Just about 50 year ago today I was watching a so-called “moon landing”, where you sak????...try in my backyard!  Yes, it is true! 

Sudbury was visited by the Apollo “astronauts” prior to their “moon landing” so that they could familiarize themselves with the geology of the area which is supposed to be similar to that of the moon….this is well-known.

What is NOT well-known is that Neil Armstrong was actually a washed-up off-Broadway actor before he was spotted by NASA in the mid-1960s, and then “trained” for the “moon landing” that supposedly occurred in July, 1969. 

You want the Truth?  Can you handle the Truth!?  Here it is…"red pill "time…

In fact, while the world was glued to their televisions watching breathless as Armstrong supposedly took “One small step for man, one giant step for Mankind...” I was looking out the rear-facing window at 1034 Hawthorne Drive, Sudbury, Ontario, watching a US Government film crew on a rocky outcrop film a man in a space suit amble down from a cardboard “lunar lander”, and plant his feet in a pile of conveniently placed sawdust as he uttered his famous line. 

“Buzz” Aldrin was there as well.  He was off to the side and outside of camera range smoking a Marlboro, and chatting with Stompin’ Tom Conners who happened to be in town for a gig.

Note - The original first lines from the song “Sudbury Saturday Night” went as follows. The lyrics that were later changed at the insistence of the US Government are underlined…

“The girls are out to Bingo and the boys are gettin' stinko,
And we think no more of NASA on a Sudbury Saturday night.
The glasses they will tinkle when the stars begin to twinkle,
And we'll think no more of faked moon landings on a Sudbury Saturday night…”

Stompin’ Tom spent the next 44 years playing a song whose lyrics had actually been dictated by the propaganda arm of the CIA.  This is 100% true.

What happened after that, you ask?

Well, the film crew and NASA actors were packed up and gone by about midnight, with all vestiges of their presence wiped away by G-Men from the US Government.  The world then began to celebrate the miracle of the “moon landing” that is being commemorated this week. 

But Tom and I knew better.

And now it can be told.

Questions for Mueller

Robert Mueller will appear before Congress on July 24^th to speak to his report into Russian interference in the last presidential election.  

Here are some questions that I would love to see him asked…

1. The Origins of the Investigation: "Did the Steele Dossier have anything at all to do with your investigation, either its inception of as a source of evidence for the investigation itself?"

Note - Trump's shills in the media have alleged for years that the Mueller investigation was prompted by the Steele Dossier. It is important to put this lie to rest, as the purpose of this is to suggest that they entire investigation is illegitimate as it was somehow a Clinton/Democratic Party/"deep state" set-up. Not true.

2. Barr's Bona Fides I: "Shortly after Barr was made Attorney General, the issuing of indictments by your office stopped, and in particular, all speculation that the President's son may be indicted for lying to Congress came to an end. Of course, you did not recommend any indictments against him. Were you ever considering recommending such indictments, and Did Barr order you to not pursue any indictments against Trump Jr.?"

Note - Barr was made Attorney General for the sole purpose of limiting then shut down the investigation, which is what he did. This needs to be brought into the light of public scrutiny.

3. Barr's Bona Fides II: "Before your report became public, Attorney General Barr issued an exceptionally misleading summary of the report that you attempted to correct in a letter that you sent to him personally shortly thereafter. Would you please outline your concerns with Barr’s summary of your report, and highlight its many inaccuracies."

Note - See above - it is important to note that Barr serves Trump personally, not the American people or justice.

4. Premeditated Obstruction: "You have noted that your investigation was limited, in part because of the use of encryption technology by some of the persons of interest.  Can you describe the effects of use of encryption and especially how damaging was this attempt to hide secret communications to your investigation?"

Note - Trump and his shills have claimed that the report exonerates him. It is important to note that his minions successfully thwarted the investigation through the use of the same technology used by secret government agencies; drug dealers and money launderers; and child pornographers to hide what they are actually doing from scrutiny by authorities. This was not a complete investigation so there can be no actual exoneration.

5. Trump's Tweets and Obstruction of Justice: “The broadest definition of Obstruction of Justice contained in Chapter 73 of Title 18 of the United States Code, referred to the Omnibus Clause, defines Obstruction of Justice to include anyone who ‘corruptly... endeavours to influence, obstruct, or impede, the due administration of justice" in connection with a pending court proceeding.’ Throughout your investigation, President Trump used his Twitter account to attack the investigation, the persons working for you, and to attack you personally in an obvious attempt to derail what you were doing. Do you believe that this relentless attack on your and your investigation qualifies as Obstruction of Justice according to the Omnibus Clause?"

Note - Trump's relentless assault on law enforcement in the United States has no precedent in American history. The man has no resepct for the Rule of Law. The public needs to understand how unethical and morally challenged the President actually is, and to have this in their minds as they head to the polls next year.

6. Obstruction of Justice II: "A total of 417 federal prosecutors have read your report and have gone on record as stating that from what they read, there is enough evidence to support a charge of Obstruction of Justice against Donald Trump. To be clear, if he was not the sitting president and therefore if he was not protected by Department of Justice policy against charging sitting presidents with crimes, would you agree with these people - would you have pursued an indictment for Obstruction of Justice?"

Note - Trump obstructed justice - this needs to be made clear to the American people.

7. Collusion: “You have explained that collusion is irrelevant, and that you were looking into possible criminal conspiracy in the form of cooperation between the Trump Campaign and the Russians to subvert American democracy. While you did not find enough evidence to proceed with a criminal indictment against anyone, your report does suggest that you did find some evidence of conspiracy and cooperation between the Trump Campaign and Russia. Would you please outline for this committee the specifics of the evidence of cooperation between the Trump Campaign and Russia during the last presidential election?”

Note - ANY level of cooperation between Russia and the Trump Campaign is exceptionally disturbing. The public needs to be aware of all of it, even if Mueller does not think there is enough evidence to meet a strict criminal law test of culpability.

Last Daze of the Stock Market Disco

The USA had an excellent jobs report yesterday - 225,000 jobs created in June, which far outstripped the estimate of 165,000 new jobs. 

The unemployment rate rose to 3.7%, but this is a fifty year low (Note - I know that you know that this statistic is unreal, as it only measures the number of people unemployed in the last four weeks in the USA...just play along, please.) 

Finally, there was 3.1% wage growth year over year, which suggests some slight inflation on the horizon - a hallmark of a growing economy.

In short, ALL GOOD! Isn't it?

The S&P 500 was down...the DOW was down....the NASDAQ was down.  

Why were these major US indices down when the jobs report indicates a growing economy, and presumably bright years ahead for things like corporate profits?

The good jobs report was a BAD thing for what really matters, which is interest rate policy.  The 225,000 new jobs number probably means that the US Fed will not lower interest rates as some had been predicting for the last few months.  

And this is BAD because it means that US companies will not be able to borrow money at lower rates to continue to fund the stock buy backs that have been propping up the stock markets in the USA for at least the last 16 months.  

You see...

Low rates = more corporate borrowing = more buy backs = more artificially inflated stock prices = more profits for corporate executives when they exercise their options. This is how the country now works..."Government of the rich, by the rich, for the rich..." 

Why isn't fair to say that this latest jobs report is practically stealing money right out of the hands of the privileged class in the USA! More Americans working is BAD for the only business that counts! For shame!

The game is rigged, and everyone must continue to play their part until the while rotten edifice comes tumbling down. Expect to hear about a phone call from President Trump to Fed Chairman Powell very soon about the need to get rates down again, asap.

The Swindle Continues...

Reality

Stuff I heard recently and what it really means.

“You can now get $20,000 off a brand new 2018 Ford F-150 – that’s down from the retail price last year of $55,000, fully loaded!”

Meaning – the $55,000 F-150 anyone bought less than 6 months ago is now worth only $35,000.

“The Tampa Bay Rays had their lowest attendance at a game ever last week, at under 5,800 fans.”

Meaning – Americans are tapped out again in terms of their disposable income and their ability to keep borrowing…welcome to the start of the next recession.

“Uber lost $1 Billion last quarter.”

Meaning – Uber lost $1 Billion last quarter.

“OPEC needs to cut oil output owing to decreasing demand for oil…”

Meaning – We are at the start of a worldwide recession, likely led by China.

“Companies on the TSX bought back their stock on the open market at more than twice the previous rate, at a total of over $50 Billion in 2018…”

Meaning – The Swindle Continues, but North of the border this time; the stock market is a bubble, only driven by stock buy-backs that are perpetrated to drive stock prices up so corporate management can blow out options with higher profits.

“Trump threatens Google, Facebook and Twitter…”

Meaning – The Russians have signaled to Trump that they will help him win again in 2020, and he is clearing the deck for more pro-Trump, Russian propaganda by using the power of the presidency to cow the main social media outlets into accepting Russia's lies.

“Trump backs off on Huawei threat…”

Meaning – President Xi promised to back the building of a new Trump Tower in Beijing.

"Gold is at it's highest prices in six years!"

Meaning - The US Fed went on summer vacation.

"Bitcoin is up 50% in a month!"

Meaning - See comment re Gold, immediately above.

"Kamala Harris won the second Democratic candidate's debate!"

Meaning - Vice President Harris becomes the President in 2021, after an obscure court filing from 1996 is made public confirming that President Sanders has actually been dead for 23 years.