Russia To Hold ‘Limited’ Ukraine Annexation Vote, Including For Region Of Zaporizhzhia Nuclear Plant

Russia To Hold ‘Limited’ Ukraine Annexation Vote, Including For Region Of Zaporizhzhia Nuclear Plant

Russia is planning to hold “limited” referendums in September for territory it’s captured in Ukraine, according to regional media citing government sources. This is expected to start in the Donbas – where fighting is still raging after Russian forces have captured significant territory, particularly with the separatist Donetsk People’s Republic (DNR) and the Luhansk People’s Republic (LNR), according to a recent Moscow Times report

Moscow is “impatient” and would like to “pull off” referendums in the Donetsk and Luhansk regions as fast as possible amid stalemate on the battlefield, said the Vyorstka news website citing unidentified government sources.

Street scenes from the 2014 Crimea referendum, via PBS.

A senior Russian lawmaker, Andrei Turchak, was cited as saying last week, “These territories are Russian regions.”

While in the opening weeks and months of the now 6-month long invasion there was widespread speculation over whether Russia would seek to annex territory outside the Donbas, it now seems clear the Kremlin is talking about referendums beyond just the far east.

Crucially, at a moment the world has watched with growing alarm the volatile situation at Zaporizhzhia Nuclear Power Station in southeastern Ukraine, Russian state media is now previewing a referendum in Zaporizhzhia Oblast during the coming weeks.

According to TASS on Wednesday (machine translation): 

The referendum on the status of the liberated territories of the Zaporizhia region will be held in September, the exact date is still unknown. Berdyansk Mayor Alexander Saulenko announced this to journalists on Wednesday.

“The referendum will, of course, be held on our territory. We are preparing for this referendum, it is planned for September, but I can’t say the exact date yet.”

The White House has meanwhile condemned any efforts at staging “sham” referendums, which it said the US will never recognize.

According to the latest Biden administration response to the latest Russian media reports:

“Since they obviously are having trouble achieving geographic gains inside Ukraine, they are trying to gain that through false political means,” White House national security spokesman John Kirby said in a briefing last week.

“The Russian officials themselves know that what they’re doing will lack legitimacy, and it will not reflect the will of the people,” he added.

Tyler Durden
Wed, 08/31/2022 – 18:20

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Treasuries’ Worsening Liquidity Points To Broader Market Turmoil

Treasuries’ Worsening Liquidity Points To Broader Market Turmoil

By Masaki Kondo, Bloomberg Markets Live commentator and reporter

Deteriorating liquidity in Treasuries points to turbulence across various assets.

A Bloomberg liquidity index that measures deviations of yields from their fair value climbed to the highest level since March 2020 this week.

Such “noise” in the US bond market suggests a general lack of arbitrage capital and tightening of liquidity in the overall market, according to a research paper from the National Bureau of Economic Research.

The apparent decline in arbitrage capital may be a result of persistently hawkish stance by the Fed and other major central banks amid historic inflation that’s at the same time fanning concern over a global recession.

The shortage of risk takers could create a one-way move in asset prices, especially when they are falling. Looking at implied volatility, the equity market seems to be most under-pricing such liquidity risks.

Tyler Durden
Wed, 08/31/2022 – 18:00

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Norwegian Tesla Owners Go On Hunger Strike Over Company’s Poor Customer Service And Build Quality

Norwegian Tesla Owners Go On Hunger Strike Over Company’s Poor Customer Service And Build Quality

Generally when your product or service is so poor that your customers decide to go on a hunger strike to try and resolve their issues, it’s not the best PR look for your particular company.

This is the crisis that Tesla is dealing with this week after a group of owners have “begun seeking out an alternative means to get Tesla’s attention”, including a hunger strike, according to a report by The Drive

The owners are taking exception with “poor customer service” and being “ignored by the automaker” as phone calls go unanswered. 

According to the report, the list of issues with their vehicles includes “poor paint quality, rust, inability to meet claimed battery life, failing heat pumps, stuck door handles in the cold, and yellowing infotainment screens (that Tesla told the NHTSA were only meant to last “5-6 years” anyway).”

Some have also suffered “issues with the car’s lights, bubbling seats, water collecting in the trunk, loose trim pieces, and reduced power”, while others are simply complaining that “autopilot does not work properly”. 

Tell us something we don’t know…

Regardless, owners felt like they had to escalate the issue because the company’s customer service is awful. They complain about spending “an inordinate amount of time waiting on hold to actually speak with someone from Tesla” and not having their calls returned. The Drive even commented that they have heard “similar complaints” from U.S. owners.

The owners are hoping to catch the attention of Elon Musk – who is currently busy fighting what appears to be a losing battle with Twitter over his legal obligation to buy the company – to try and resolve their issues. 

Interestingly, Musk recently Tweeted about how he had been fasting – a move that some saw as an SEO strategy to try and take attention away from the owner’s group.

Tyler Durden
Wed, 08/31/2022 – 17:40

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Era Of Fake Money Is Gone: Egon von Greyerz Warns “No One Can Escape What’s Coming”

Era Of Fake Money Is Gone: Egon von Greyerz Warns “No One Can Escape What’s Coming”

Via Greg Hunter’s,

Financial and precious metals expert Egon von Greyerz (EvG) stores gold for clients at the biggest private gold vault in the world buried deep in the Swiss Alps.  EvG is a former Swiss banker and financial expert that says massive money printing and huge amounts of unpayable debt will lead to a monster financial meltdown soon

EvG says, “I did forecast that… the stock market is going to fall at this particular point.  The 1,000-point drop on the DOW last Friday came right on cue.  Fundamentally, the markets should have crashed a long time ago…”

“It appears clear to me we are going to see a 30% or so fall in the markets in the next one to two months.  That’s the first fall, but that’s just the beginning…

Markets will fall, in real terms, by 90% to 95% in the coming years.  That’s not going to happen overnight, but if it does happen overnight, then all bets are off and there will be a total disaster.  The world is going to shut down…

Then there will be some extra money printing and people will be optimistic for a while.  There is no money anymore because the money that is printed will make zero difference.  There will be nothing that will drive the world forward.  All the decisions on top of the with energy, climate change, sanctions, etcetera, will mean it all will crash a lot faster…

The world is going to see a collapse that it has never seen before in history, and there is absolutely no remedy for that.  They are not going to be able to do anything.  Everybody who is not in power is going to promise something that they can’t deliver.  When they get into power, they will be thrown out because they couldn’t deliver. 

So, the era of Shangri-la and money printing and saving the world by fake money—that era is totally gone.”

EvG goes on to say, “I am not a prophet of doom and gloom, but it may sound like it.  I am just someone who just looks at risk…”

This is why I got into gold 20 years ago.  Gold was the best solution to a risk situation in the financial world. . . . We almost had a collapse in 2008, and it was patched up temporarily. 

This time they won’t succeed…We have a situation nobody can solve…

Initially, there will be money printing, but adding new debt to pay old debt is not a great solution to the problem.  I don’t think there will be any orderly reset at all…

At some point, there will be an implosion of the system.  There has to be…

You have to remember when the debt collapses, all the assets that were supported by this debt will collapse. 

You will have an implosion of values, I expect 90% plus.  Stocks crashed in 1929 to 1932 by 90%.  The risk back then and the magnitude of the problems then were nothing compared to what we have today.  Remember, today it’s global, and it’s every single country in the world… It’s everywhere, and no one can escape what’s coming.”

In closing, EvG says, “Gold never goes up in price.  Gold maintains stable purchasing power, and that’s why it is such a wonderful commodity and asset.”

EvG likes silver, too, but he says be careful because it will be more volatile than gold.

There is much more in the 37-minute interview.

Join Greg Hunter of as he goes One-on-One with Egon von Greyerz of Matterhorn Asset Management, which can be found on

*  *  *

To Donate to Click Here

There is free information, analysis and original articles written by EvG and others on To get a copy of EvG’s new book “Gold Matters,” click here.

Tyler Durden
Wed, 08/31/2022 – 17:20

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Grant McCracken: The Rise of Artisanal Everything and ‘Cruelty-Free Capitalism’

a headshot of Grant McCracken next to an orange background with white letters that say cruelty-free capitalism

“I think you could argue that Alice Waters changed us almost as much as Steve Jobs did, almost as much as Chairman Mao did. I mean, it’s extraordinary to see what follows from her creation of a tiny restaurant in Berkeley in 1971,” says anthropologist Grant McCracken. “The artisanal revolution ushers in a new model of production and consumption. At its best, it ushers in a cruelty-free capitalism or aims for something like that.”

Steve Jobs, Mao, and…Alice Waters? Who is she, exactly?

I’ll get to that in a moment, but first, let me ask you a question: While you’re hanging out in your hip, handmade loungewear, sipping your pot-still bourbon, and noshing on some homemade sourdough bread covered with butter you churned yourself from your neighbor’s stash of unpasteurized goat milk, did you ever stop to wonder just how you—and America writ large—got to a place where Wonder Bread is a shorthand for all that is terrible and mediocre and any sort of super-rustic, craggy, unsliced, dense, dark loaf of barely processed grain is a sign not just of cultural sophistication but of moral superiority? 

Only a generation or two ago—for our parents and grandparents—the cutting edge of consumption was to buy the most industrial, machine-made products you could afford, preferably objects that had never been touched by human hands and carried a brand insignia that conveyed high status or value. When it came to even white-collar jobs, the dream was often to dress exactly like everybody else and work for a giant corporation that was bigger than the market and, thus, could guarantee you a job for life. You died and went to heaven if you were an IBM salesman, all of whom wore blue suits, white shirts, red ties, and black shoes.

But now we live in an artisanal age, where everything is small-batched and hyper-personalized. This revolution has been building for years or even decades, and now it is everywhere around us, influencing not just what we wear, eat, and listen to but how we work, where we live, and how we think of our deepest identities. Mass production, including of personalities and social types, is out, and individualization is in.

In Return of the Artisan, anthropologist Grant McCracken explains “how America went from industrial to handmade” in the post–World War II era. This is a funny, deep, and well-written book that takes us to small towns and hipster neighborhoods all over the country, from New York City to Bowling Green, Kentucky, to Berkeley, California, where Alice Waters changed everything when she opened up a revolutionary new restaurant called Chez Panisse.

There’s no better guide to this brave new—and sometimes incredibly annoying—world than McCracken, a Baby Boomer raised in British Columbia during the 1960s and an early theorist of how the digital revolution and rise of the internet were remaking us in ways that are mostly better but also deeply challenging to community. His own life is as long and strange a trip as the one he documents in Return of the Artisan.

Previous Reason interviews with and select articles by Grant McCracken:

Is America Too Forgiving? The Case of Lance Armstrong,” February 20, 2021

Grant McCracken: The New Honor Code vs. Radical Wokeism,” February 3, 2021

How To Have a Good Idea: A unified theory of fantasy football; Eat, Pray, Love; and Burning Man,” December 2012

How Cultural Innovation Happens: Q&A with Anthropologist Grant McCracken,” June 7, 2011

The Politics of Plenitude,” August/September 1998

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California Will Now Punish Doctors For Refusing To Comply With The Establishment COVID Narrative

California Will Now Punish Doctors For Refusing To Comply With The Establishment COVID Narrative

In January of this year the California state government formed the “Vaccine Work Group” which was tasked to construct a series of draconian bills designed to silence the large percentage of the population that refuses to comply with covid lockdowns and vaccine mandates.  Most of these bills have since been attempted and have failed to pass or have been shelved.  They included:

A bill that would have required all schoolchildren to get vaccinated against COVID, another that would have made all employees in California show proof of vaccination, and legislation that would have required local law enforcement officials to enforce public health orders.

All of these measures fell apart for obvious reasons, but for the sake of clarity let’s consider these facts:

1)  School children are at virtually no risk of facing extreme illness or death from covid and the vaccine does nothing to prevent transmission of the virus.  So, there’s no legitimate scientific reason to vaccinate them.

2)  Proof of vaccination is what we call a “vax passport.”  They are using this system now in China to apply even more oppression to the citizenry, and that type of thing is just not going to fly here in the US, not even in California.  Furthermore, if the vaccines actually work, then the vaccinated have nothing to fear from the unvaccinated.  If the vaccines don’t work, then there’s no reason to force people to take them in the first place.

3)  Finally, they can pass any law they want to pressure law enforcement to bully people with covid mandates, but these would still be unlawful orders according to the constitution.  Beyond that, what is the Vaccine Work Group going to do if LEOs still refuse?  Fire them?  You can’t fire a Sheriff.  You can fire a city cop, but who are you going to replace them with if large numbers do not comply?  And there are plenty of other LEO jobs in other states waiting for them if they do get fired.  The state government has zero leverage; they are scrambling desperately for control that they will never achieve.  

Only one bill put together by the Vaccine Work Group has been passed by the state senate, and it is being sent for approval by Governor Gavin Newsom this week.  Doctors and other medical professionals accused of spreading “disinformation” and “misinformation” can now have their state license suspended or revoked by the Medical Board or Osteopathic Medical Board of California for “unprofessional, conduct.”

The bill defines “misinformation” as:  False information that is contradicted by contemporary scientific consensus contrary to the standard of care.

Note that it does not define misinformation as info that is contrary to scientific facts and evidence.  Rather, it defines it as something that runs contrary to “consensus” and “standards of care.”  The state government gets to dictate what the consensus is, and what the standard of care is.  Meaning, any doctor that contradicts the STATE is subject to punishment.  Science has nothing to do with it.   

In a lawsuit against California’s Medical Board, Physicians for Informed Consent called the bill an attempt to “unconstitutionally target dissenting physicians, including by attempting to intimidate by investigation, censor and sanction physicians who publicly disagree with the government’s ever-evolving, erratic, and contradictory public health Covid-19 edicts.”

Another point to consider is that vax mandate cheerleaders have long argued that most people standing in opposition to the mandates don’t have the “knowledge” or education to make informed decisions or arguments on the matter.  But what happens when trained doctors and virologists stand in opposition?  Well, they aren’t taken seriously either.  Those people are now treated like criminals and face the loss of their careers.  

Clearly this debate is not about knowledge or education, it’s about conformity.   

California is the only state in the US that has rendered such a bill into law so far.  While numerous blue states have sought to use intimidation to bring the medical community into line with the mandate agenda, California is the first on one seeking to justify government force against doctors through legislation. It’s hard to say if this is evil or admirable – At least they are now being open about their true intentions.     

Tyler Durden
Wed, 08/31/2022 – 17:00

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What If?

What If?

Authored by Tumoas Malinen via The Epoch Times,

Probably the most important thing in forecasting is the ability to ask: What if something is not how you think it is? Open speculation on world developments is the key to establishing a position, where basically nothing can really surprise you. And at that point, you have come so far as a forecaster.

The “What if?” questions I am currently asking are:

  1. What if the raid of the Mar-a-Largo resort of President Trump was politically motivated?

  2. What if the war in Ukraine was part of some plan to break the emerging Eurasian (China, Europe, Russia) global power structure?

  3. What if central banks, or the “power brokers” behind them, know that monetary policies are going to crush the economy with interest rate hikes?

  4. (To continue:) What if central bankers are deliberately pushing for the central bank digital currencies, or CBDCs, to gain total oversight over the economy?

The first two are rather political, but as I mentioned before, politics has become a major factor affecting the global economy. That is why the questions need to be addressed and, perhaps, speculated upon.

Speculation on the actual reasons behind the Trump raid are already running high. There have been reports of Federal Bureau of Investigation whistleblowers coming forward with statements on the politicization of the FBI. At this point, this is naturally pure speculation, and political games, but these are alternative narratives we can consider, because if they turn out to be true, they will have serious repercussions.

Most important, if the raid was politically motivated, why is former President Donald Trump viewed as such a threat to the current system, or the “establishment,” such that his possible becoming again the president of the United States should be stopped? Comparing the tenures of Presidents Barrack Obama and Joe Biden with that of the one term of President Trump, for example, the latter was a rather peaceful and prosperous world.

Due to the Ukraine–Russia war, Europe may be facing its darkest winter since 1945. Our economic systems and societies are unlikely to be able to withstand major energy and possible food crises combined with interest rate hikes. Due to sanctions and central bank policies, we could be facing the deepest economic crisis since World War II, which also would make primarily Europeans a lot poorer.

What’s Going On?

This leads to the question: Why on earth did President Vladimir Putin attack Ukraine?

He had to know that it would lead to a serious backlash. It also is possible that there were other forces in play that paved the path toward war. There’s the scenario that some powerful entities in the United States wanted to stop the formation of the economic power structure among China, Europe, and Russia. The “entities” would have known which policies would push Putin “over the edge.”  This is, again, just speculation, but it’s an idea we need to consider, because, if accurate, it would mean that the economic prosperity of Europeans and possibly the world is being “sacrificed” for a geopolitical play or to accomplish an even more ominous objective.

Could this impoverishment, and thus a controlling of the middle-class through ravaging inflation and indebtedness, be a possible endgame of the “globalists” possibly threatened by another presidential term for Trump?

The question with central bank policies is equally pressing and worrying.

A sound economy needs no savior. It also does not need anyone to “push” it to grow with, for example, artificially low interest rates, as a healthy economy grows organically from the risk-taking of entrepreneurs, corporations, and individuals with the assistance of the financial system. Mistakes naturally do happen, and they sometimes lead to serious financial crashes and economic crises. However, stringent and punitive policies toward excessive financial speculation are truly the only remedy against “moral hazard” and other financial malpractices leading to crises. The financial crises in Finland and Japan during the early 1990s are good examples of this. And it should be remembered that the biggest economic crisis thus far, the Great Depression of the 1930s, occurred just 16 years after the creation of the Federal Reserve.

Moreover, for the past decades, central bankers have manipulated our economies through interest rates and asset purchasing (and selling) programs (quantitative easing and tightening). What has this led us into? The global economy is more fragile than ever, and many heavily indebted sovereigns, such as those in the eurozone, remain solvent only by continuous central bank support. Essentially, the world economy is in constant need of resuscitation because of central bank policies.

How demented would be that, after destroying an economy, central bankers would make themselves appear as our saviors?

It would be Machiavellian: to crash something just to get more power over it.

This, however, could be the “hand” central bankers are playing, especially through the looming issuance of central bank digital currencies (CBDCs). The issuance of digital currencies controlled by the central banks would eventually annihilate the banking system, or make it an obedient follower of central bank policies. This is because, especially during crises, deposits would flock to the central bank from commercial banks, as all deposits in the central bank are essentially fully covered by the taxpayers, or the State, and the money creation (printing) abilities of the central bank. This would lead the central bank to obtain a monopoly-like power in banking.

Then only cash would need to be banned for the central banks to gain full control of interest rates, and the economy.  The end result would be an economic dystopia, where the ability of citizens’ to control their own (economic) fate—a particular kind of agency—will effectively have been taken away.

This is something central bankers may try to sell us after the economy crashes, through the rationalization of “safety.” This again is speculation that ought to be considered as the end result of such an aim; it truly would be horrible, on the level of a kind of enslavement of the populace.

So, I urge everyone to ask the “What if?” questions presented above (and more).

This is because if any of them (not to mention several not discussed above) turn out to be true, we are living in a very different world that has been presented to us.

Tyler Durden
Wed, 08/31/2022 – 16:40

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“Prepare For An Epic Finale” – Jeremy Grantham Warns Stock Market ‘Super Bubble’ Has Yet To Burst

“Prepare For An Epic Finale” – Jeremy Grantham Warns Stock Market ‘Super Bubble’ Has Yet To Burst

Having infamously spotted and profited from bubbles in Japan in the late 1980s, tech stocks at the turn of the century and in US housing before the 2008 financial crisis, GMO’s co-founder Jeremy Grantham laid out in his latest note to investors why the “super bubble” that he previously warned about hasn’t popped yet (despite this year’s somewhat chaotic market behavior).

“You had a typical bear market rally the other day and people were saying, ‘Oh, it’s a new bull market,” Grantham said in an interview with Bloomberg.

“That is nonsense.”

Specifically, the 83-year-old investors says that the surge in US equities from mid-June to mid-August fits the pattern of bear market rallies common after an initial sharp decline — and before the economy truly begins to deteriorate; and sees more trouble ahead because of a “dangerous mix” of overvalued stocks, bonds and housing, combined with a commodity shock and hawkishness from the Fed.

“My bet is that we’re going to have a fairly tough time of it economically and financially before this is washed through the system,’’ Grantham said. 

“What I don’t know is: Does that get out of hand like it did in the ‘30s, is it pretty well contained as it was in 2000 or is it somewhere in the middle?”

In his note today, Grantham warns that we are entering the superbubble’s final act

Executive Summary

Only a few market events in an investor’s career really matter, and among the most important of all are superbubbles. These superbubbles are events unlike any others: while there are only a few in history for investors to study, they have clear features in common.

One of those features is the bear market rally after the initial derating stage of the decline but before the economy has clearly begun to deteriorate, as it always has when superbubbles burst. This in all three previous cases recovered over half the market’s initial losses, luring unwary investors back just in time for the market to turn down again, only more viciously, and the economy to weaken.

This summer’s rally has so far perfectly fit the pattern.

The U.S. stock market remains very expensive and an increase in inflation like the one this year has always hurt multiples, although more slowly than normal this time. But now the fundamentals have also started to deteriorate enormously and surprisingly: between COVID in China, war in Europe, food and energy crises, record fiscal tightening, and more, the outlook is far grimmer than could have been foreseen in January. Longer term, a broad and permanent food and resource shortage is threatening, all made worse by accelerating climate damage.

The current superbubble features an unprecedentedly dangerous mix of cross-asset overvaluation (with bonds, housing, and stocks all critically overpriced and now rapidly losing momentum), commodity shock, and Fed hawkishness. Each cycle is different and unique – but every historical parallel suggests that the worst is yet to come.

The Times that Really Matter for Investors

Most of the time (85% or thereabouts) markets behave quite normally.

In these periods, investors (managers, clients, and individuals) are happy enough, but alas these periods do not truly matter. It is only the other 15% of the time that matters, when investors get carried away and become irrational. Mostly (about 12% of the time), this irrationality is excessive optimism, when you see meme stock squeezes and IPO frenzies, such as in the last 2 years; and just now and then (about 3% of the time), investors panic and sell regardless of value, as they did at 666 on the S&P in 2009 and with many stocks trading at a 2.5 P/E in 1974. These times of euphoria and panic are the most important for portfolios and the most dangerous for careers. (Keynes’ famous Chapter 12 would suggest that when confronted with a bubble, running off the cliff with company is the safest strategy for managers, whose business imperative, after all, is to be a permabull, where the real money can be made. This is a strategy adopted reasonably enough by almost everyone.)

This 15% is very different from ordinary bull and bear markets.

Averaging ordinary bull and bear markets with this handful of outliers dilutes the data and produces misleading signals. My strong suggestion is to treat the superbubbles – 2.5 to 3 sigma events – as special, collectively unique occasions. It is as if there is a phase change in investor behavior. After a long economic upswing and a long bull market, when the financial and economic systems look nearly perfect, especially with low inflation and high profit margins, as does the friendliness of the authorities, especially toward cheap leverage, there gets to be a flashpoint, like that summer evening when every last flying ant takes off simultaneously. This effect luckily creates measurable events in the market. So you can see the explosion of confidence and speculation and crazy wishful thinking regardless of value however you wish to define it. And outcomes from this unique group of superbubbles (just three in modern times in the U.S. before this current one) are indeed special: the much discussed (by us) divergence between conservative and speculative stocks; the rapid bear market rallies discussed later here; the rapid onset of recession (3 out of 3 incidents to date, with 1 mild – 2000 – and the other 2 – 1929 and 1972 – severe); and finally, the much increased probabilities of further unexpected financial and economic accidents.

We’ve been in such a period, a true superbubble, for a little while now. And the first thing to remember here is that these superbubbles, as well as ordinary 2 sigma bubbles, have always – in developed equity markets – broken back to trend. The higher they go, therefore, the further they have to fall.

The Stages of a Superbubble

My theory is that the breaking of these superbubbles takes multiple stages. First, the bubble forms; second, a setback occurs, as it just did in the first half of this year, when some wrinkle in the economic or political environment causes investors to realize that perfection will, after all, not last forever, and valuations take a half-step back. Then there is what we have just seen – the bear market rally. Fourth and finally, fundamentals deteriorate and the market declines to a low.

Let’s return to where we are in this process today. Bear market rallies in superbubbles are easier and faster than any other rallies. Investors surmise, this stock sold for $100 6 months ago, so now at $50, or $60, or $70, it must be cheap. Outside of the late stage of a superbubble, new highs are slow and nervous as investors realize that no one has ever bought this stock at this price before: so it is four steps forward, three steps back, gingerly exploring terra incognita. Bear market rallies are the opposite: it sold at $100 before, maybe it could sell at $100 again.

The proof of the pudding is the speed and scale of these bear market rallies.

  1. From the November low in 1929 to the April 1930 high, the market rallied 46% – a 55% recovery of the loss from the peak.

  2. In 1973, the summer rally after the initial decline recovered 59% of the S&P 500’s total loss from the high.

  3. In 2000, the NASDAQ (which had been the main event of the tech bubble) recovered 60% of its initial losses in just 2 months.

  4. In 2022, at the intraday peak on August 16th, the S&P had made back 58% of its losses since its June low. Thus we could say the current event, so far, is looking eerily similar to these other historic superbubbles.

Fundamentals Threaten to Fall Apart

Economic data inevitably lags major turning points in the economy. To make matters worse, at the turn of events like 2000 and 2007, data series like corporate profits and employment can subsequently be massively revised downwards. It is during this lag that the bear market rally typically occurs.

Why are the historic superbubbles always followed by major economic setbacks?

Perhaps because they occurred after a very extended build-up of market and economic forces – with a major surge of optimism thrown in at the end. At the peak, the economy always looks near perfect: full employment, strong GDP, no inflation, record margins. This was the case in 1929, 1972, 1999, and in Japan (the most important non-U.S. superbubble). The ageing cycle and temporary near perfection of fundamentals leave economic and financial data with only one way to go.

Our “Explaining P/E” exhibit says something similar.

The first leg down in today’s superbubble was “explained” by rising inflation, which has been the main driver of historical valuations, after an unprecedented lag during the second half of 2021. (Although the most speculative stocks were hit fast and hard from the beginning of 2021.) If anything, the question for us at GMO is why such a historic inflation surge in 2021 did not immediately hit broad market P/Es more substantially: new players in the stock market unfamiliar with inflation? Excessive belief in the Fed’s ability to support markets and hence too much faith that inflation would be transitory?

The next leg for the model is likely to be driven by falling margins. Our best guess is that the level of explained P/E will fall toward 15x, compared to the current level of explained P/E of just under 20x, while the actual P/E just rose from 30x to 34x in mid-August in what was probably a bear market rally. (Of course, if the model is indeed driven by falling margins in the near future, then the E will fall as well as the P/E. As you can see, this would imply a substantially lower market than even we have suggested!)


As of 7/20/2022 | Source: GMO

My papers, “Waiting for the Last Dance” and “Let The Wild Rumpus Begin,” made a simple point: in the U.S., the three near perfect markets with crazy investor behavior and 2.5+ sigma overvaluation have always been followed by big market declines of 50%. The papers said nothing about fundamentals except to expect some deterioration. Now here we are, having experienced the first leg down of the bubble bursting and a substantial bear market rally, and we find the fundamentals are far worse than expected.

The whole world is now fixated on the growth-reducing implications of inflation, rates, and wartime issues such as the energy squeeze.

In addition, there are several less obvious short-term problems.


  • The food/energy/fertilizer problems, exacerbated by the war in Ukraine, are even worse in the emerging world (especially Africa) than the European energy problems we have heard about. Russia and Belarus account for 40% of global exports of potash, a key fertilizer, driving wheat/corn/soybean prices to records earlier this year. Increased food and energy prices are causing acute trade imbalances and civil disorder in the most vulnerable countries, as seen for example in the extremely rapid virtual collapse of the Sri Lankan economy. The energy shock is now all but guaranteed to tip Europe into recession; while the U.S. market has a long history of ignoring foreign problems and interactions, global growth is assuredly coming down.

  • In China, which has carried by far the biggest load of global growth for the last 30 years, too many things are going wrong at the same time. The COVID pandemic continues, massively affecting its economy. Simultaneously, the Chinese property complex – key to Chinese economic growth – is now under dire stress. This real estate weakness is mirrored around the world, with U.S. homebuilding for example now declining rapidly to well below average levels, as perhaps it should given the record unaffordability of new mortgages. The situation looks even worse in those countries where mortgages are typically floating rate. Historically, real estate has been the most important asset class for economic stability.

  • We are coming off one of the greatest fiscal tightenings in history as governments withdraw COVID stimulus, both in the U.S. and globally. Historically, there has been a strong relationship between fiscal tightening and subsequent decline in margins (see Appendix). At the same time, the new U.S. excise tax on stock buybacks looks like a harbinger that the U.S. government is beginning to shift its attitude toward the eternal battle between labor and capital (which capital has been winning for many decades now). This may even flow through in time to renewed antitrust action, which would be fantastic for consumers but less fantastic for stock investors.

Meanwhile, the long-term problems of demographics, resources, and climate are only getting worse and now are beginning to bite even in the short run.


  • Population: workers are beginning to be in short supply and will stay that way for the indefinite future in China and the developed world, where no single country is producing babies at replacement rate. 5 Together with rapid ageing, this will be a drag on growth and a push on inflation. Resources: many metals, especially those required for decarbonizing, are in an unavoidable squeeze, lacking sufficient reserves – which currently are a mere 5-20% of what is needed 6 – and capex is woefully low. It simply does not compute, and it makes clear that our existence in any faintly satisfactory condition will depend on our sustained success with replacement, recycling, and new technologies. A second critical resource shortage is fertilizer. Potash and phosphate, both currently mined and both necessary for all life, are: a) finite; and b) very unevenly distributed: Morocco controls 75% of the world’s best phosphate, and Russia and Belarus mine 45% of current potash with even more than that mined in Canada. Food: with deteriorated and eroded soil, freshwater shortages, and increasingly resistant pests, food productivity is slowing down even as African population growth outweighs the slowdown elsewhere. The UN global food index was recently at an all-time high.

  • Climate can be seen this year as in danger of spiraling out of control. Never before have major droughts, and dangerously high temperatures and fires, beset China, India, Europe, and North America at the same time. This is severe enough to act as a drag on global GDP: the Rhine, which moves nearly 20% of German heavy traffic, is closed by drought; French nuclear power stations have had to reduce production because rivers are too hot to be used for cooling; China has had to halve its hydropower (18% of its electricity), which has also been reduced in Canada, Norway, India, and elsewhere by low water levels; rising temperatures in India, Asia, and parts of Africa are suddenly high enough to pose health problems for those without air conditioning and outdoor workers, especially farmers. The collective impact of difficult farming weather is beginning to impose its own global costs and may destabilize a growing number of poorer countries in the near future. It is all happening so much faster than anyone expected 10 years ago.

All that is to say: these long-term negative issues that I have kept at the back of my mind (and hopefully yours) for years – climate, human fertility, food, and other resources – are now becoming relevant short-term issues that bear on both inflation (upwards) and growth (downwards).

Indeed, collectively, they pose a potential risk to our long-term viability.

Prepare for an Epic Finale

Previous superbubbles saw a much worse subsequent economic outlook if they combined multiple asset classes: housing and stocks, as in Japan in 1989 or globally in 2006; or if they combined an inflation surge and rate shock with a stock bubble, as in 1973 in the U.S. and elsewhere. The current superbubble features the most dangerous mix of these factors in modern times: all three major asset classes – housing, stocks, and bonds – were critically historically overvalued at the end of last year. Now we are seeing an inflation surge and rate shock as in the early 1970s as well. And to make matters worse, we have a commodity and energy surge (as painfully seen in 1972 and in 2007) and these commodity shocks have always cast a long growth-suppressing shadow.

Given all these negative factors, it is unsurprising that consumer and business confidence measures are testing historic lows. And in the tech sector, the leading edge of the U.S. (and global) economy, hiring is slowing, layoffs are rising, and CEOs are increasingly bracing for recession. Recently, we have seen a bear market rally. It has so far played out exactly in line with its three historical precedents, the bear market rallies that marked the middle phase of deflating superbubbles. If the bear market has already ended, the parallels with the three other U.S. superbubbles – so far so strangely in line – would be completely broken. This is always possible.

Each cycle is different, and each government response is unpredictable. But these few epic events seem to act according to their very own rules, in their own play, which has apparently just paused between the third and final act.

If history repeats, the play will once again be a Tragedy. We must hope this time for a minor one.

Tyler Durden
Wed, 08/31/2022 – 16:20

via ZeroHedge News Tyler Durden

August Hawk-nado Hammers Stocks, Bonds, Commodities, & Crypto

August Hawk-nado Hammers Stocks, Bonds, Commodities, & Crypto

Worryingly high EU inflation data started the day off and that was followed by worryingly low ADP jobs data as the $100 trillion question remains unanswered: whether “bad (data) is bad (for markets)” because the Fed and ECB have their hands still tied – e.g. this morning’s ADP miss as a ‘tell’ into NFP – or alternatively, whether “good (data) is bad (for markets)” – e.g. yesterday’s JOLTS and US Consumer Confidence, along with this morning’s ‘hot’ Euro Area inflation beat.

Financial Conditions ‘eased’ dramatically from the start of July to mid-August but have ‘tightened’ since…

Source: Bloomberg

But, if any chart highlights the background for asset-performance in August, it is the drastically hawkish shift in market expectations of both rate-hikes this year (and rate-cuts next year)…

Source: Bloomberg

As FedSpeak stomped on the throat of the stock market’s dovish “Fed Pivot” narrative…

Source: Bloomberg

Bonds and Stocks were dumped into the month-end close.

Nasdaq was the worst performing US Major this month, now down 4 of the last 5 months. The Dow & S&P 500 were also down around 4% on the month (after being up over 4% mid-month)…

As Goldman’s Chris Hussey notes, S&P 500 performance for August can be summarized as a tale of 2 halves – investors developed an appetite for risk assets in the first half of the month on expectations of a potential peak in inflation and an eventual Fed pivot, followed by a steep reversal (and then some) as markets digested Fed Chair Powell’s speech which reiterated the FOMC’s commitment to bring down inflation and outlined that the FOMC will likely need to maintain ‘a restrictive policy stance for some time’. The round-trip suggests that the market might have gotten a bit too far ahead in pricing a Fed pivot, particularly given inflation remains well above its 2% target.

After trading up to their 200-DMAs mid-month, all the US majors are now back below the 50-DMAs…

Only Energy and Utes sectors ended the month green while tech was the ugliest horse in the glue factory…

Source: Bloomberg

Credit and equity risk ended notably worse on the month, despite the first half of August seeing an easing of tensions…

Source: Bloomberg

Bond bulls suffered a one-way street of pain this month with the shorter-end of the curve underperforming as yields soared. The last week saw a decoupling with the long-end as recession fears resume…

Source: Bloomberg

The 5Y yield saw its 2nd biggest monthly spike since Nov 2009, closing the month at its highest since May 2008…

Source: Bloomberg

The yield curve did nothing but flatten all month with 5s30s puking almost 40bps back into inversion…

Source: Bloomberg

The dollar rallied for the 3rd straight month in August (5th of last 6)…

Source: Bloomberg

Cryptos had another ugly month in August with Bitcoin underperforming Ethereum (-16% vs -9% respectively)…

Source: Bloomberg

The broad commodity space ended the month unchanged…

Source: Bloomberg

But that hid a lot of pain under the hood with silver slammed hard and oil tumbling…

Source: Bloomberg

August was WTI’s worst month of the year (and 3rd straight month lower)…

Gold has seen a massive roundtrip after bouncing off $1700 in mid-June and stalling above $1800 around mid-August, plunging back lower since…


Finally, bear in mind that US and European stocks are entering the seasonally weakest time of the year, with major benchmarks posting negative average performance in September over the past 30 years.

Source: Bloomberg

September is set to present a flurry of catalysts, with Powell’s Sept. 8 speech and US inflation data paving the way for the crucial Fed meeting. 

Tyler Durden
Wed, 08/31/2022 – 16:01

via ZeroHedge News Tyler Durden

How To Trade The Post-Jackson Hole Market: Thoughts From The JPMorgan Trading Desk

How To Trade The Post-Jackson Hole Market: Thoughts From The JPMorgan Trading Desk

Some observations from JPMorgan trader Andrew Tyler on the post J-Hole reality.

The Fed is seemingly more hawkish but bond market is pricing in roughly the same probability of 75bps as pre-JH. The terminal rate is looking to be about 3.75% in this tightening cycle. Implying about another 125bps or 150bps of tightening. JPM view is another 125bps of tightening (75bps in Sept, 25bps in Nov, and 25bps in Dec; as a reference Goldman is 50/25/25).

What changed with bonds? 2023 rate cut expectations have shifted from Sept to Nov for the first cut. Jay Barry had flagged that yields had moved a touch too far and we are seeing buyers overnight. Keep an eye on the USD as any move lower could attract buyers of treasuries.

To me, the biggest change from the Fed was them telling the market that they are more concerned about inflation than economic growth. They still maintain a data dependent approach. Recall that Volker halted his tightening cycle when CPI hit 4%. Earlier this month, bond market had been pricing in CPI falling below 3% by summer 2023.

What does this mean for stocks? This century, Sept has been the seasonally weakest month of the year and Q4 the strongest quarter. This could repeat itself as

  • (i) increases in rates vol have been negative for Eqys,
  • (ii) rates vol has spiked into Fed events and CPI prints,
  • (iii) we could see rates vol collapse after the Sep 21 Fed,
  • (iv) earnings season could be similar to Q2 and if so that is net positive for stocks but need to see how co’s continue to deal with inflation and FX risk.

What are the risks from here?

  • (i) a move higher in oil; oil over a $100 seems to be a psychological bear level for stocks;
  • (ii) EPS risk is key as many investors thought Q2 would be the beginning of an earnings recession;
  • (iii) macro data worsening which could look like growth metrics falling while the labor mkt tightens

What’s the trade?

  • I think Tech leads on the move higher especially if the 10Y fails to make new highs (3.47%).
  • Tactically, Energy seems to be a tradeable trend with WTI oscillating in the $90 – $100 range; longer-term Energy remains a buy.
  • Financials could be a tactical long as they have tended to trade higher into EPS; also we have seen clients look to do a Financials L/S index via JPM Delta-One as NIM continues to expand there are idiosyncratic winners/losers.
  • China is an interesting tactical trade as the $29bn bailout fund seemingly removes a Lehman-like event and stimulus removes some of the Tech-sector regulatory overhang.
  • We have seen clients replace US Tech exposure with FXI and KWEB exposure as recently as last week. I like hedging with IG Credit.

More in the full note available to pro subs.

Tyler Durden
Wed, 08/31/2022 – 15:47

via ZeroHedge News Tyler Durden