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(Advancing Time)—The recent rally in the stock market flowing from what almost appeared to be a victory lap on the part of Fed Chair Jerome Powell gives the impression inflation has been vanquished. Many market pundits have taken this to mean upward momentum is not ready to abate. Still, market crosscurrents pose massive danger, in short, things could go several different ways.
Adding to the recent confusion of why the markets are moving up is whether liquidity is, or is not being added to the financial system. It appears bank lending is contracting but other things are happening behind the scenes in swap rates and yield curves. While some of us point to the Fed saying it is tightening and reducing its balance sheet some economists point to a back channel inflow of liquidity juicing the system.
A case can be made that recent market action remains more about liquidity than interest rates. A lack of liquidity can be poisonous. When you need money, whether the amount is small or large, not being able to get it can lead to a life-changing or grave outcome. Interestingly, as noted above, the liquidity issue remains unresolved. Central banks are well aware that contagion from one area can spill over into other sectors of the economy and markets. This is why China continues to inject liquidity into its market. How much of that money is getting out of China is an issue.
So, here we sit, new market highs at a time when many economy watchers are voicing concerns the economy is rapidly slowing and the Fed is already behind the curve in dropping rates. The counterargument being floated is that all is well and we are in the midst of a soft landing or no landing. The latter is the optimistic view that we have entered a Goldilocks moment and the markets are set to go ever higher.
Those taking the stand a quick reversal of Fed policy and looking at rapidly falling rates may be failing to consider trees don’t grow to the sky. It could be argued a major pullback is necessary to avoid a much more severe problem or bigger disaster in the future. Inflation is a key component in assessing where things go from here. Again, I point to The Hard Asset Inflation / Paper Asset Deflation Theory
Much of the current market danger stems from the fact the fluid financial and economic situation is highly leveraged. If something breaks, the amount of money needed to backstop and halt a collapse of the system will be far larger than anything we have seen in the past. Remember a massive drop in asset prices and the value of bonds directly impacts pension funds and many other aspects of our financial structure.
A great deal of what we call growth has been, or is now financially engineered by companies buying back their own shares and other companies rather than growing organically. This risk is constantly being downplayed as more and more of the concentration of wealth pushes takes place, into just a few companies. A case and point often raised is the huge market capitalization of what is known as the “magnificent seven.”
As usual or maybe even more than usual, we should continue to factor in the idea things could be shaken by another pandemic, massive war including the use of nuclear weapons. The whole idea that stocks climb a wall of worry and fall like a stone underlines the fact that markets are non-linear and do not move in a straight line. People tend to slip into a generally optimistic feeling of complacency and discount this reality.
Lower inflation figures strongly into the euphoria we see in the market. Much of this has been driven by lower gasoline prices which are likely to prove temporary and the idea the costs of “shelter” or keeping a roof over your head will soon decline. These notions brush aside several important facts such as the rising cost of labor and other factors feeding into housing. These include insurance, soaring maintenance costs, and rising taxes. All of these are expected to move higher in the future.
A bond fella recently recently made the case that yields would drop as inflation falls. Several pundits have speculated the Fed must “know something, or be spooked” to have changed course. Pulling on this thread could lead us back to the notion China’s economy is in free-fall and it is the main reason rates will be falling everywhere. This has resulted in the notion we will see super strong demand for bonds during a recession even if the supply is huge.
Still, buying long-term bonds to hold is far different than buying them to hold. Long term we have to look at the future of fiat money and inflation from currency debasement. I’m not convinced it is wise for investors to lock themselves into any fiat currency long-term as things could change rapidly.
Consider the possibility that the Fed is yielding to pressure rather than making a policy change based on choice. By prematurely declaring inflation as no longer an issue it takes pressure off government bonds and banks. When we look back at how this plays out it is likely the importance of liquidity and the money supply will prove far more important than minor changes in interest rates.
In a recent video delving into inflation in commodities, Daniel Lacalle claimed there are only three ways to halt inflation and inflation is fueled by monetary conditions. Lacalle says the only way to stop inflation is raise interest rates, reduce the amount of money in the system, or to create an aggregate demand reduction of credit.
The public sector, or to qualify, governments are busy thwarting all these factors. As long as governments and central banks continue to overspend and print money the inflation beast will remain a ferocious creature.
Mysterious “Skyquakes” Are Causing Strange “Booms” in the Sky, and Scientists Have No Explanation
by Michael Snyder
(End of the American Dream)—What is causing the extremely loud “booms” that people are hearing in the sky all over the world? We are being told that “skyquakes” are responsible, but scientists have no idea why these “skyquakes” are occurring. In some cases, the “skyquakes” cause such powerful shaking that…
The Biggest Sale on Long-Term Storage Beef EVER
by Sponsored Post
Let’s cut to the chase. Prepper All-Naturals is offering an unprecedented 40% off for it’s “Beef Steak” survival bags with promo code “steak40”. With a 25-year shelf life and a single ingredient (beef, of course), our most popular product is available for a very limited time with the biggest discount…
Seattle Is Ordered to Stop Blocking Illegal Alien Deportations in the Most Hilarious Court Decision Ever
by PJ Media
A federal court has just pooped in the oatmeal of the West Coast, Messed Coast™governors and local election officials suffering from acute cases of Trump Derangement Syndrome who think they can stop illegal alien deportations. And after this hilarious and thorough legal takedown from the 9th Circuit Court of Appeals,…
Illegal Alien Terror Suspect Found Dead in Cook County Jail Cell
by Slay News
An Islamic illegal alien has been found dead in his jail cell after being arrested on terrorism charges. According to CWBChicago, 22-year-old Sidi Mohamed Abdallahi was found dead at the Cook County jail in Illinois on Saturday. Abdallahi was arrested on felony terrorism and hate crime charges in October. He…
Trump’s Wild Bunch Is Ready for Action
by Frank Miele
If for no other reason than that it will elicit fear in the hearts of autocracy-phobics, I propose that Donald Trump’s second-term Cabinet be known as “The Wild Bunch.” The name is best known as the title of Sam Peckinpah’s classic 1969 western featuring a colorful cast of aging outlaws…
FAA Issues Flight Restrictions Over Questionable Drone Activity Near Trump’s Bedminster Golf Course
by Just The News
The Federal Aviation Administration (FAA) on Tuesday said that it has issued two flight restrictions on the area surrounding President-elect Donald Trump’s Bedminster golf club in New Jersey, following questionable drone activity. The drone sightings were first reported on Nov. 18, but have continued into this week, according to Fox…
Ex-FBI Agent Convicted for Stealing From Jan 6 Defendant During Raid
by Trending Politics
A former Houston-based FBI agent has been convicted of stealing valuables and cash while conducting searches. In one instance, the agent stole cash and silver bars from a non-violent January 6 defendant’s home. Nicholas Anthony Williams, 36, was indicted on January 31 in the Southern District of Texas. Williams, who…
Democrats, Media Elite Urge Biden to Pardon Trump’s Alleged ‘Enemies List’
by Breitbart
President Joe Biden should issue preemptive pardons to his political allies and those deemed to be on President-elect Donald Trump’s alleged “enemies list,” Democrats and their media allies believe. Delivering a preemptive pardon indicates an admission of guilt, although Democrats claim a preemptive pardon would only be intended to block…
Fani Willis Forced to Release All Communications With Jack Smith, J6 Committee
by Trending Politics
The Fulton County Superior Court has ruled against District Attorney Fani Willis, ordering her to disclose communications with Special Counsel Jack Smith and the House January 6 Committee. The decision, announced on Tuesday, follows a lawsuit brought by Judicial Watch, a conservative watchdog group, which accused Willis of violating Georgia’s…
Lindsey Graham Is the Warmongering NeoCon Leading the Charge to Upend Pete Hegseth
by JD Rucker
Pete Hegseth represents a shift away from the wokeness that has infected the United States military. This is possibly the biggest reason President-Elect Donald Trump tapped him to be the next Secretary of Defense and the vast majority of Republicans on Capitol Hill can support this, at least for the…
‘Where Are Black Democrats?’: Charles Payne Tells Personal Story to Call Out ‘Huge Double Standard’ of Biden Family
by Nicole Silverio, DCNF
(DCNF)—Fox Business host Charles Payne called out the alleged “huge double standard” of President Joe Biden’s family Tuesday by revealing that his brother, who struggles with a crack addiction, is currently serving a jail sentence. Payne said his brother, who is getting out of jail on Friday, is likely one…
Zelensky Admits Ukraine Can’t Retake All Its Land: ‘We Must Seek Diplomatic Means’
by Breitbart
Ukrainian President Volodymyr Zelensky conceded in an interview on Tuesday that Ukraine does not have “enough forces” to restore sovereignty over Russian-occupied Crimea and “must seek diplomatic means” to end the Russian invasion and regain its land. The state-run Ukrinform outlet reported that Zelensky described Crimea – which Russia colonized…
Ultra-Processed Foods: How Bad Are They for Your Health?
by Olivia Cook
(Natural News)—Despite the serious health risks associated with eating junk food, they remain the most consumed food products in many countries, particularly developed ones. But a review published in The BMJ, which studied 9.8 million people, warns that eating a lot of ultra-processed foods can increase your risk for 32 diseases. Among these are heart…
“Already Pretty Far Down the Line”: The Container Store Could File for Bankruptcy as Soon as Next Year
by Tyler Durden, Zero Hedge
(Zero Hedge)—As the retail apocalypse that started with Amazon and e-commerce continues, the latest victim is The Container Store. The retail giant could file for bankruptcy as soon as next year, according to the New York Post, who said the retailer is blaming its recent descent on “a weak housing…
Mysterious ‘Car-Sized Drones’ Over New Jersey Prompt FBI Investigation
by Zero Hedge
Several weeks of mysterious drone swarms over the skies of one New Jersey county near the military research and manufacturing facility Picatinny Arsenal have sparked concerns among residents and prompted an FBI investigation. “It’s kind of unsettling,” Mike Walsh, a Morris County resident who has spotted the drones on numerous…
UNESCO’s New Mission: Train Influencers About Combatting Online “Misinformation”
by Reclaim the Net
The UN Educational, Scientific and Cultural Organization (UNESCO) is now incorporating teaching influencers how to “fact check” into its activities. UNESCO claims that influencers have become “primary sources of news and cultural information” around the world – which prompted it to carry out a survey into how these online personalities…
