There is a day of reckoningMy Comment: I don't see how we cannot have severe consequences from 35 years of reckless Fed monetary policies and an out-of-control US national debt (I'm expecting $40 Trillion by 2026). I expect a severe recession ahead which the Fed will be powerless to control.
The "Soft Landing" Charade | ZeroHedge
Excerpts:
The point is to show you that I have the capability of being bullish, yet I am still extremely bearish on both equities and the economy right now.
I have to once again - and maybe for the millionth time since I started this blog - reiterate that Fed policy makes it a near-mathematical-impossibility for a soft landing for the economy. The flawed psychology of the last 2 decades of “buy the dip always”, fueled by dovish monetary policy and 0% interest rates, simply isn’t going to cut it with rates at 5% and the Fed tightening.
The entire playing field has changed, yet our psychology and sentiment toward the market has remained exactly the same. Something’s going to have to give.
But make no mistake about it, I am choosing to start yet another week proclaiming the same message: the soft landing charade is exactly that - a charade. It’s a fallacy, nothing else, that remains alive and well in the ethos of finance and the financial media that, in my opinion, poses a sizeable current threat to markets at this point.
The market has performed exceptionally well for the last 6 months, given the circumstances. Now look at the below chart. Technical analysis is in the eye of the idiot beholder, so I’m going to tell you the market could be setting up for a massive double top, while bulls are going to tell you that we’re about the launch from the world’s largest “cup and handle” formation
The moral of the story is that technical analysis is a joke and nobody really knows jack sh*t about where the market is going from here. But one thing is for sure: a pronounced move higher through all-time highs (a “breakout”) hasn’t happened yet.
This also seems like another great time to warn that stocks take the stairs up and the elevator down. Think about how long it took to get to 3400 in early 2020 before the market puked up shards of its own pelvis and slammed lower to 2200 in a matter of just days. Years of gains, wiped away in moments.
Keep this in mind when I remind you again that the fundamental indicators that I have been watching over the last 18 months are basically redlined in favor of recession or a market crash. I noted these indicators two weeks ago and have updated them here.
Since then, the Shiller PE has moved higher, to 31.62x. For comparison, that’s about twice its median of 15.93x and almost twice its mean of 17.03x
Nearly every other metric over at Current Market Valuation continues to scream “overvalued” more than it did two weeks ago.
The Buffett Indicator (market cap/GDP) pins us somewhere between “overvalued” and “strongly overvalued”, at about 1.5x standard deviations from its trend.
Looking again at a price/earnings model, we see that the current CAPE value as a # of standard deviations from the average is also above 1x.
Most interesting of these metrics is the yield curve, which has been screaming recession for months (I pointed this out all the way back in February, whilst the bond market was malfunctioning, albeit not quite as much).
I have been predicting that the market is going to crash yet again. As I have said before, I don’t think I’m wrong, I just think my timing has been.