Currently heavily short the market FWIW. I put this together for anyone who can't read. Enjoy!
The Fed has a current target terminal rate of about 5%. Here is what that will look like historically.
The last time we had rates of 5% that was sustained for any period of time was the mid to late nineties. Let's see how the personal savings rate was back then.
The 90's saw a savings rate of about 7.25, currently we are at 3.1.
Well major disasters are difficult without the help of too much credit. So let's take a look.
Not that I am a big fan of them but fractals are neat cause they offer a reference for timing. Trying to mark it down to the day, week or month is foolish but to generally situate yourself, they are not bad.
This image is from September so just fast forward two months. We currently have something special, a mixture of systemic issues and overvaluation. Either way, this bear is just about to start roaring.
What is different now that we didn't have to deal with back then?
Passive investing makes up a significantly larger share than it used to.
Get ready for selling across the board regardless of what investment you have. The index doesn't care.
What else? Oh. Options!
We also have a new wonderful asset class called crypto, lets check in....
Frauds are starting to get exposed and the leverage that was being used poses a systemic risk to related parties. In an environment that is already not too peachy.
Well at least no recession yet!
As Burry predicted, white collars are getting smoked while part-timers are doing ok. On net though, this is not good.
Inflation is far from victimless. In real terms, people are about to be in the deep red when it comes to earnings. Inflations initial benefits are coming to collect their payment.
While there is a more nuanced conversation to be had, the point stands. Dems are here to stay and as Gen Z continues to mature into voting age, the odds that the GOP can gain any meaningful ground significantly declined as of November 8th. The rough part about free money is that it is highly infectious. The best short term solution to inflation is more inflation.
The 10 year yield is still yielding negative real returns and in the face of a much higher chance of inflationary fiscal policies, does monetary policy matter as much as we all like to believe?
Debt to GDP also shows that we are not nearly as equipped to bargain rates downward. Unless we start to inflate it away, except inflation pushes yields higher. Uh oh. A rock and a hard place.
View this as housing P/E ratio. Now lets look at mortgage rates!
Oh lovely! At 2000's levels. So a housing bubble to rival 08 with an even weaker consumer. Fun!
What makes bank runs even more fun? A sensationalization of world events. Bandwagoning is much more volatile and dangerous than ever before thanks to the mass leveraging of eyeballs.
Let us not forget the market usually runs ahead of these catastrophic economic events by about 1 year too. So this is probably much closer to smoking the markets than it may seem.
Let's finish with on a happy note! Buffett! Let's look at his indicator!
The indicator is coming down fellas! All the way back down to the dot com bubble high! Great progress!!!
TL:DR We are F*****
Not financial advice. In short, I'm max short.
No comments:
Post a Comment