At this point it is no great surprise that the Trump administration is the victim of an attempted “soft coup” led by so-called career politicians, most of whom are liberal, Obama/Clinton loyalists, staffing the various agency buildings sprinkled around Washington D.C. As we noted a few days ago, here is just a small sample of what has been leaked by these career politicians in just the past couple of weeks:
The “National Guard roundup”: The AP published a story this week on a draft Homeland Security memo that would call up National Guard units to round up illegal immigrants. The administration quickly denied it was considering the idea, but someone leaked that memo.
Torture executive order draft: Only days after the inauguration, a draft of an executive order started circulating detailing plans to reinstate the CIA’s “black site” prisons and using Gitmo for detainees. It’s uncertain where this came from, and nothing has come of it since.
His conversation with Australia: An official told the NYT that the call between Trump and Australia Prime Minister Malcolm Turnbull was heated and had an abrupt end.
His conversation with Mexico: Dolia Estevez from Forbes reported that sources from both sides told her that Trump threatened to send U.S. military to Mexico during his “friendly” phone call with President Nieto.
The raid in Yemen: Military personnel leaked information about the raid in Yemen, which led to the death of a Navy SEAL. They accused Trump of not having the proper intelligence before signing off on the raid.
Gen. Flynn’s phone call: Weeks after the FBI warned the Trump administration that then-National Security Advisor Michael Flynn talked about Obama’s sanctions during his call with Russia in December, the information was leaked to the press, which ended up with Flynn forced resignation.
The insiders: Republican Senator John McCain told reporters on Tuesday, “It’s a dysfunctional White House, and nobody knows who’s in charge.” Others have told journalists, including our Mike Allen about the “borderline chaos” of Trump’s administration, Steve Bannon’s growing influence, Trump’s dramatic process for selecting his SCOTUS, etc.
Trump even commented on the persistent leaks again today in an early morning, mini tweet storm saying that “classified information is being given to media that could have a devastating effect on U.S.”
The FBI is totally unable to stop the national security “leakers” that have permeated our government for a long time. They can’t even……
But the latest leak, while not terribly damaging to the Trump administration, certainly wins the award for “Most Ironic.”
Earlier this week on February 20th, the State Department’s acting legal adviser, Richard Visek, prepared a four-page memo for Secretary of State Rex Tillerson, entitled “SBU: Protecting Privileged Information”, which warned of the dangers of leaking by State Department employees. Ironically, that memo was promptly leaked to Josh Rogin of the Washington Post who subsequently penned an article bragging about his latest intelligence breach.
While the memo warns that leaks are a “detriment of informed policymaking and the reputation of the institution from which the leak emanated”, those warnings apparently fell upon deaf ears.
“When such information is leaked … It chills the willingness of senior government officials to seek robust and candid advice, which ultimately is to the detriment of informed policymaking and the reputation of the institution from which the leak emanated,” the memo states.
State Department officials unhappy with a policy have many perfectly good alternatives to leaking, the memo argues. The can participate in the policy process as it develops or convey their concerns about a policy afterwards to their co-workers, supervisors or department leadership.
“The Department has also benefitted [sic] from the existence of the Dissent Channel, which is itself a confidential deliberative channel that seeks to facilitate open, creative, and uncensored dialogue on substantive foreign policy issues,” the memo says.
Of course, Secretary of State Tillerson has responded to the leaks by shutting off access to sensitive information.
Several State Department officials told me that they see evidence of an effort by Tillerson to stymie leaking is already underway. For example, detailed readouts of Tillerson’s meetings with foreign officials are no longer distributed widely inside the building, leaving officials in relevant bureaus unsure exactly what transpired.
Another official told me Tillerson has shortened the list of officials allowed inside the daily 9:15 a.m. senior staff meeting, which has previously served as a key channel through which various State Department offices and bureaus learn about the day’s agenda and get direction from the secretary’s office.
A third State Department official told me he was instructed to make requests for policy information and guidance over the phone or in person, rather than commit any policy discussions to an email that might be leaked.
And while quarantining sensitive information is a more than appropriate step by an administration plagued by leaks emanating from a group of disaffected career politicians seeking political retribution, we can already hear the faint cries of Democrats who will undoubtedly blast what will surely become a “secretive” Trump administration…never mind that they caused the problem in the first place.
We discuss the reasons why Apple stock is a sell in this video, sure you have to get the position sizing right, as well as the timing, but this stock is going down. We discuss 9 main drivers for what will move Apple`s stock lower over the next 3 quarters, the best unbiased, objective analysis you are going to find anywhere right here in this video. Don`t Buy Apple at these levels period like the greater fools need to ultimately make money with their poor investment price decisions!
1. Consumerism is psychological/ spiritual junk food (French: malbouffe) that actively reduces well-being (bien-etre) rather than increases it.
2. Better rather than more: well-being is increased by everything that cannot be commoditized by a market economy or financialized by a cartel-state financial machine– friendship, family, community, self-cultivation. The goal of economic and social growth should be better, not more. On a national scale, the cancerous-growth measured by gross domestic product (GDP) should be replaced with gross domestic happiness/ gross national happiness (GNH).
3. A recognition that resources are not infinite, despite claims to the contrary. For one example of many: China Is Plundering the Planet's Seas (The Atlantic). Indeed, all the evidence suggests that access to cheap energy only speeds up the depletion and despoliation of every other resource.
4. The unsustainability of consumerist "growth" that's dependent on resource depletion funded by financialization (i.e. the endless expansion of credit and phantom collateral). (This is covered in greater depth in my short book Why Our Status Quo Failed and Is Beyond Reform.)
5. The diminishing returns on private consumption and "bridges to nowhere" (crony-capitalist public consumption).
6. The failure of neoliberal capitalism and communism alike in their pursuit of growth at any cost.
Degrowth is heresy in what John Michael Greer calls the religion of progress (i.e. growth). The faith that growth equals progress is akin to the Cargo Cult of Keynesianism, the notion that expanding debt exponentially to drive diminishing returns of growth is not only necessary but a moral imperative.
Both the religion of growth and its Cargo Cult are narratives used to justify the expansion of global finance via financialization. Expanding capital, profits and power is the key driver, and the religion of growth is merely the public-relations narrative that mesmerizes the debt-serfs, political toadies and media sycophants.
Does this look like a world with plenty of room for everything to expand?
Does this look like a world ripe for limitless expansion of debt to fuel limitless growth of consumption?
This leads to a fundamental question: how do we design a system that enables us to do more with less of everything? How do we design a system that incentivizes doing more with less rather than squandering resources via optimizing human greed?
A DeGrowth economy must fulfill two requirements:
1. The DeGrowth economy must provide paid-work livelihoods and opportunities for everyone who wants them.
2. The DeGrowth economy must institutionalize a decentralized, democratic, self-organizing process to allocate human, social, resource and financial capital as an alternative to centralized states/banks and profit-maximizing corporations.
2. Not everything that is valuable is profitable, and so maximizing profit is not the sole arbiter of "value," nor is it a sound process for allocating labor and capital for everything that has value but isn't profitable.
3. Centralization undermines democracy and generates privilege, inequality, insecurity, conflict and waste by its very nature. (I discuss this further in my short book Inequality and the Collapse of Privilege.)
DeGrowth requires two intertwined systems: a decentralized, localized, globally connected network of self-organizing productive "tribes" whose labor generates a global labor-backed crypto-currency.
DeGrowth is coming whether we like it or not or plan for it or not. Our choice is to blind ourselves to the implosion of the "growth" status quo and squander the opportunity to create an economic system that thrives in DeGrowth, or accept the end-game of financialized "growth" and embrace the technological tools that enable decentralized, localized, globally connected networks funded by a labor-backed crypto-currency.
The conventional objections to DeGrowth boil down to: it isn't the status quo, so it can't possibly work. Actually, it's the status quo that isn't working, and DeGrowth is the result of that simple yet profound reality.
Shortly before the close yesterday, retailers tanked when in a Reuters interview, Trump said that he supports “some form” of border tax without elaborating, sending the S&P Retail Sector tumbling.
“I certainly support a form of tax on the border,” he told Reuters on Thursday. “What is going to happen is companies are going to come back here, they’re going to build their factories and they’re going to create a lot of jobs and there’s no tax.” Trump also said his administration will tackle tax reform legislation after dealing with Obamacare, the health insurance system put in place by Obama.
Not even 24 hours later, the White House appears to have flip-flopped again because earlier today, according to Axios, Goldman’s ex-president Gary Cohn, and chief economic advisor to President Trump, told a group of CEOs that the White House does not support the House GOP version of a border adjustment tax, according to an attendee.
The comment was made while Cohn was being interviewed by The Carlyle Group CEO David Rubenstein, at a private event hosted by The Business Counsel in Washington, D.C.
The result: A mirror image of yesterday’s selloff, as now the market no longer has to fear Trump’s tweets, but his staggering position reversals, now coming inside the span of a day.
The markets are about to find out that the Trump Whitehouse can do little if anything to stimulate growth in the next 12 months.
This is not a criticism, nor an endorsement of Trump; it is a criticism of the insane ramp job stocks have done since November 8th.
Trump didn’t even take office until January 20, 2017. And he is quickly discovering that Government moves much slower than we’d all like.
With that in mind, let’s run through Trump’s proposals and the potential timeline for each.
1) Tax Reform: Trump wants to simplify the tax code, lower the corporate tax rate and offer multinationals the ability to repatriate their offshore cash with a one-time tax charge of 10%.
Long-term, all of these moves are positive for the US economy. They will increase competitiveness and will allow large firms to put more money to work in the US.
However, NONE of these items will have a major impact on the markets. Yes, a lower tax rate opens the door to greater corporate profits… but:
a. As Tom Lee noted on CNBC, NO ONE gets excited about investing in a company because said company is going to be paying less in taxes.
b. Any benefits from tax reform would take at a minimum six months and possibly a year to really begin trickling into corporate results.
c. More importantly, most large corporations are already paying little if any taxes due to various gimmicks and loopholes. The Government Accountability Office found that in 2012 more than 43% of large corporations (those with $10 million in assets or more) paid no corporate income tax.
2) Deregulation/Infrastructure Spending/ etc.: None of these will likely be implemented until late 2017. A large-scale stimulus is a controversial measure that might not get through Congress. Even if it did, we already know such policies have minimal effect on GDP particularly late in an economic cycle (Bush’s Stimulus act of 2008 and Obama’s Stimulus of 2009).
3) Obamacare Repeal: having complained about Obamacare non-stop for years, the Republicans have yet to present a repeal now that Trump is in office. House Speaker Paul Ryan claims Congress will act on this by August… but anything the House passes would still need to get through the Senate before Trump could sign it into law.
So again… the earliest we’re talking about is end of 2017.
My point with all of the above is that any policies Trump implements will have minimal impact on stocks in the short-term. They CERTAINLY do not warrant the absolute mania we are currently experiencing in the stock market.
Simply put, stocks have gotten way ahead of themselves. At the earliest, major reforms will get signed into law at the end of 2017. And the actual economic impact won’t be felt into mid-2018.
And yet, stocks have erupted higher as though we’re going to see a massive fiscal stimulus plan, tax reform, and Obamacare repeal with the next 2-3 weeks.
This is the sort environment in which Crashes can happen.
And while the odds are low that we get an actual Crash… this environment is more conducive to Black Swan events than any other in the last seven years.
On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.
In it, we outline how the coming crash will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.
We are giving away just 1,000 copies of this report for FREE to the public.
This week marks the 90th anniversary of the Radio Act of 1927, the sweeping federal law championed by Herbert Hoover that first established how radio spectrum—the “economic oxygen” of the emerging information age—would still be governed nearly a century later. Under its edicts, markets would be preempted and no ownership of the “ether” would be permitted. Public administrators would dole out privileges to deploy wireless networks according to the “public interest.”
Today, writes Thomas W. Hazlett, the Radio Act is gasping, choked by its contradictions. Over time, regulatory failure has thankfully given way to more open markets. The evolution of vibrant mobile data networks—nowhere prescribed or mandated in law—is an emphatic endorsement of the power of policy liberalization. Yet the ghost of Herbert Hoover still haunts progress, frequently placing needless obstacles in the path of competitive forces.
The US is not the only country undergoing social upheaval and polarization over its treatment of foreigners. On Friday, police in South Africa fired rubber bullets, tear gas and water cannon to disperse rival protest marches in the capital Pretoria, after mobs looted stores belonging to immigrants earlier in the week. According to BBC, a low-flying police helicopter was also been deployed amid the stand-off between local protesters and foreigners, with both groups armed with sticks, bricks and knives, prompting police to disperse the angry mobs.
South African nationals marched through Pretoria to protest against immigrants
The main group behind the Pretoria protests, Mamelodi Concerned Residents, has blamed foreign nationals for taking jobs and accused them of being involved in prostitution rings and drug cartels, accusations denied by immigrant communities. The petition delivered by the group to the home affairs ministry alleged worshippers from Zimbabwean apostolic churches, who congregate in the open, were “destroying our public parks”, and accused them of defecating, urinating and burning fires.
It also said foreigners were “arrogant and don’t know how to talk to people, especially Nigerians”.
Some protesters were driving around looking for foreigners
A man reacts to tear gas fired by police fire to disperse rival marches
A man holds his South African identity document after being attacked by a mob
President Jacob Zuma condemned acts of violence between citizens and non-nationals, his office said in a statement on Friday. Zuma appealed to citizens not to blame all crime on non-nationals. Zuma said many foreign citizens living in South Africa were law-abiding and contributed to the economy. “It is wrong to brandish all non-nationals as drug dealers or human traffickers. Let us isolate those who commit such crimes and work with government to have them arrested, without stereotyping and causing harm to innocent people,” Mr Zuma said in a statement. He said he would be championing the fight against crime to promote safer and more stable communities.
A Somali man armed with a rock is separated by police from anti-immigrant protesters
Many unemployed South Africans accuse foreigners of taking their jobs, and made it clear today. It is not the first time anti-immigrant violence has flared in South Africa against a background of near-record unemployment, with foreigners being accused of taking jobs from citizens and involvement in crime.
Meanwhile, many parts of the nation have started to resemble a warzone: shops were shuttered in Marabastad, an area of western Pretoria where many foreign nationals have their stores, and roads were blocked as the marchers gathered. Some of the foreigners carried rocks and sticks, saying they were ready to protect their stores. One Somali shopowner, 37, said he feared for his life. “My shops get looted a few times a year,” he said.
Pakistani-owned shops were targeted during the protests
Today’s marches follow the looting this week of at least 20 small businesses believed to belong to Nigerian and Pakistani immigrants. Residents said they had attacked the shops because they were dens of prostitution and drug dealing, according to Reuters. Some said they had lost jobs to the foreigners.
Police in Pretoria have made more than 100 arrests in the past 24 hours
A 34-year old South African, who declined to be named, told Reuters a Zimbabwean took his job at a manufacturing plant because he was willing to work for less. “The police must leave us alone so we can sort them out,” he said, pointing at a group of foreign shop owners.
Random acts of violence, looting and destruction of property had occurred, Acting National Police Commissioner Khomotso Phahlane said. “Over 24-hour period, 156 have been arrested,” Phahlane told a news conference, and “those inciting violence will face prosecution.” It was unclear how many of those in custody were South Africans and how many foreigners.
South Africa’s Home Affairs Minister Malusi Gigaba on Thursday acknowledged violence had flared up against foreigners this year, adding that “unfortunately, xenophobic violence is not new in South Africa.” In retaliation, Nigerian protesters vandalized the head office of South African mobile phone company MTN in Abuja on Thursday. Earlier this week, Nigeria’s foreign ministry said it would summon South Africa’s envoy to raise its concerns over “xenophobic attacks” on Nigerians, other Africans and Pakistanis.
The home affairs minister announced plans on Thursday to inspect workplaces to see if firms are employing undocumented foreigners.
Police in Pretoria say they have made more than a hundred arrests in the past 24 hours, amid the unrest.
The foundation of late South African leader Nelson Mandela says it was shocked at the decision by police to give the go-ahead for Friday’s anti-foreigner protest, calling it “a march of hatred”. Official government figures say the number of immigrants in South Africa has declined in recent years. Figures released last year said there were 1.6 million foreign-born people in the country, down from 2.2 million in 2011.
South Africa experienced its worst outbreak of violence against foreigners in 2008, when more than 60 people died. Two years ago, similar xenophobic unrest in the cities of Johannesburg and Durban claimed seven lives as African immigrants were hunted down and attacked by gangs.
With net speculative positioning starting to unwind from its historically record short crowd, yields across the curve (and in Eurodollars) are starting to fall.
With 30Y back below 3.00% today, 10Y yields have broken below 2017 closing lows and are near intraday lows back to November.
It's not just Treasuries, Bund yields collapsed today, accelerating lower into the close…
Not missing a beat, just hours after he attacked the FBI for being unable to catch “leaks”, Trump went on the attack against the news media at a gathering of conservative activists Friday.
Speaking at the Conservative Political Action Conference (CPAC), where he had spoken on several previous occasions although skipping the event in 2016, Trump delivered another “victory speech” in which he reiterated his now traditional talking points, touching on bad polling (accusing polls of being fake), promised a surge in military spending, slammed bad deals, vowed to “build the wall”, but mostly fell back on his favorite topic, lashing out at the press saying his administration was in a fight against “fake news” and especially those outlets who use “anonymous sources” while claiming he “loves the First Amendment.”
Trump said he only considers “fake news” outlets to be “the enemy of the people,” but extended the charge to say the media are dishonest and he accused it of fabricating sources for stories.
In his address to CPAC, Trump sought to clarify the difference between the press and “fake news media” and said he supports “honest” reporting and the First Amendment. “I’m not against the media. I’m not against the press. I don’t mind bad stories if I deserve them,” he said. “I am only against the fake news media or press,” he said. “I’m against the people that make up stories and make up sources.”
Trump: “Nobody loves the First Amendment more than me.”
“I want you all to know that we are fighting the fake news. It’s phony, fake,” Trump said before a crowd which took delight in the media bashing. “I called the fake news the enemy of the people. They are the enemy of the people, because they have no sources. They just make them up when there are none.”
“I’m against the people that make up stories and make up sources,” Trump said. “They shouldn’t be allowed to use sources unless they use somebody’s name. Let their name be put out there. Let their name be put out. A source says that Donald Trump is a horrible horrible human being. Let them say it to my face. Let there be no more sources.”’
Trump then again bashed Europe, and especially Sweden, as a source of bad immigration policy.
Wow. Trump is *still* maintaining an imaginary attack in Sweden actually occurred and that media refuses to cover it. http://pic.twitter.com/g740bPfLl5
Among the other topics covered, while Trump did not provide any clarity on his economic plans, he did say the Mexican wall being built “way ahead of schedule”, he promised that the repeal/replace of Obamacare is taking place on schedule; vowed that “bad dudes” would be thrown out of the country; casually mentioned tax reform and his accomplishments as the President-elect; the new massive military budget; the eradication of ISIS; repeated his desire to keeping terrorists out. He also said that global cooperation is good, but that the US will get better deals.
Trump got a warm reception when he took the stage, with huge applause and a standing ovation. Attendees continued to stand for his speech until he told them to take seat. There was also an overflow crowd in the back of the room, who chanted “USA” and “build that wall.”
Trump’s return to CPAC comes after he decided to skip it last year amid conflicts with his campaign schedule. According to The Hill, there were also reports that protesters would walk out of his scheduled speech last year. In CPAC’s 2016 poll for the White House, Trump came in a distant third behind Sens. Ted Cruz and Marco Rubio.
It's impossible to predict with certainty how much more insane our financial markets will get before an inevitable correction. But my personal bet is: A lot!
For my reasons why, take a few minutes to watch the chapter on bubbles below from The Crash Course. For those who haven't seen it before, the takeaway is this: bubbles pop only when greed in the market has been exhausted:
Bubbles make no sense economically. Or rationally. But they happen all the time as a part of the human condition.
Even while financial bubbles are enabled by dumb monetary and banking decisions, their actual genesis is rooted in primal human emotions. Greed on the way up, and fear on the way down.
The hardest part about these bubbles is not being swept up in them. As the above video shows, history is chock full of asset bubbles. We humans just never seem to learn. Like Charlie Brown's endless attempts to kick Lucy's football, we get suckered in by the promise of easy riches, only to end up flat on our back when the market suddenly yanks that promise away.
Wash, rinse, repeat.
Most of you reading this might be thinking “Hey, I’m a reasonable intelligent person. I won't fall victim to the next bubble.” Perhaps, but maybe not. The numbers say that the majority of you will. Unfortunately, being smart — even a genius — is no protection against being ruined by a bubble.
Remember from the video that even Sir Isaac Newton, easily one of the most brilliant humans ever to live, got his clock cleaned by the South Sea Bubble:
Bubbles are much easier to enter than to exit. As they build, all your friends and neighbors are diving into the pool and enjoying easy riches. You deserve some of that good fortune, right? And there will be plenty of eager parties willing to help you get on the bandwagon.
But when the bubble pops, though, action becomes much harder to take. At first, everyone assumes that the sudden drop is a temporary aberration and that the party will shortly resume. As prices fall further — and they typically fall at a faster rate than when they were rising — folks become paralyzed by fear on the way down, slowly realizing that their paper profits may indeed be gone for good. At first they're unwilling to give up the dream of the "sure thing" they so recently had, and then, once the losses start mounting, they find themselves resistant to locking in those losses by selling. Instead, they hold on to the increasingly threadbare hope that prices will at least recover to where they can ‘get their money back.’
Of course, that never happens. For all those who bought in during the mania, their money was hopelessly betrayed the moment they placed their bet. And that’s what bubbles are – merely bets. And that bet is: I bet I can get out before everyone else.
That’s mathematically impossible for the majority. It’s really only possible for a very tiny few who have the vision and the discipline (and more often than not, the luck) to pull it off. Very rare are the people who get out at the top.
Don't Be A Victim
So, to avoid becoming victim in the future, the first thing you need is the clarity to know when you have a bubble on your hands.
Well, it really doesn’t get any clearer than this:
Why Toronto (and Other Cities) Inflate Housing Bubbles to the Bitter End
Feb 20, 2017
“Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble,” Bank of Montreal (BMO) Chief Economist Doug Porter told clients in a note last week.
Many have called it “housing bubble” for a while, but now it’s official, according to BMO.
In January, the benchmark price and the average price were both up 22% year-over-year, with the average price of detached homes up 26%, of semi-detached homes 28%, of townhouses 27%, and of condos 15%. Double-digit price increases have become the rule in recent years.
But this jump was “the fastest increase since the late 1980s – a period pretty much everyone can agree was a true bubble – and a cool 21 percentage points faster than inflation and/or wage growth,” Porter explained in his note, cited by BNN.
Holy smokes! Or rather, what are people smoking up there? Bubble weed, or something. A 22% yr/yr gain? On top of a string of recent years of double-digit gains?
Here are two more features about bubbles we need to keep in mind:
Bubble exist when prices rise beyond what incomes can sustain
Bubbles always have a blow-off top
First, house prices rising a ‘cool’ 21 percentage points above wage growth over a single year is the very definition of bubble behavior. Simple math tells us that anyone who borrows to buy property eventually has to pay that loan back.
The money to pay back that property loan comes from wages. Ergo, property prices and wages cannot depart from each other forever, or even for very long, without a lot of repayment defaults resulting.
As for ending in a "blow-off top", that's just how history tells us bubbles finally exhaust themselves. They draw in every last sucker and lazy-thinking ‘investor’ until there's no "greater fool" left willing to pay a higher price. This doesn't require 100% participation from the local population; only 100% participation from everyone who can be drawn in. When that finally happens, that’s when the bubble bursts all of its own accord.
There's another way for a bubble to end, but it practically never happens. Responsible bankers and lenders could prevent the bubble's formation by simply not lending ridiculous amounts. It almost never happens for the same reasons that people buy overpriced houses: greed and our social programming to follow the herd. If all your banker buddies are making big bucks writing loans to anyone who can fog a mirror, then you'll be rewarded for doing the same. Nobody wants to be the lone, unpopular voice urging restraint when the crowds are going wild.
The quotes below from the 1850’s show how this dynamic is nothing new to society:
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.”
“In reading The History of Nations, we find that, like individuals, they have their whims and their peculiarities, their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”
Well, the good people of Toronto — as well as Vancouver, Palo Alto, Melbourne, and a large number of other real estate markets — have fixed their minds on the delusion that the recent skyrocketing price appreciation means that home prices will continue to always rise from here. So get in now! You can't lose! Don't risk getting priced out of the market!
What particularly crazy about this is that we just saw 10 short years ago how this movie ends. But those caught up in the current mania simply aren't thinking logically right now. They're fully captured by the bubble mania.
And, as before, it’s lonely out here for those of us trying to be the voice of sanity and reason. Nobody want’s to hear that now.
And later, once the painful correction has wrought its destruction, those of us who dared to sound an alert may be blamed as responsible for the losses – as if by pointing out the delusion we caused the burst to happen.
Conclusion
I could go on and on, risking being the boy who cried wolf, and point out all the other obvious bubbles infecting our financial landscape that all but assure a very difficult future of financial and economic pain.
The delusion much of society wants to believe in is that we can get something for nothing. That is, to become rich, all we have to do is buy an asset like a house or Apple stock and simply wait.
The wealth will just magically arrive. No work performed, nothing new created, nothing done. Just buy, and wait.
Of course, even a cursory examination of all of life in nature (or before humans invented thin-air money printing) quickly reveals that actual wealth comes from hard work, usually coupled with taking risks.
But somehow we’ve slipped back into the common and very human delusion of that our current culture has somehow figured out how to escape the old bonds of wealth creation. This time is different!
The Romans re-minted coins in smaller and less pure weights and it worked! For a while. Then its empire collapsed on itself.
Zimbabwe (and now Venezuela) printed and it worked! For a while. Then its citizens were left impoverished.
Society's dangerous conceit is in thinking that somehow we’ve managed to, this time, escape the hard rules of wealth creation and have discovered a new principle by which we can all get wealthy without doing anything at all. All you have to do is play the game. Put your money to work! Buy stocks and houses and you can't go wrong!
And it’s working! For now.
But when we back up a bit, it’s pretty easy to see how this cannot be true. Not for the majority. Why? Because real wealth isn't a paper gain on a house. Nor is it even money in the bank. Or a large stock portfolio.
Real wealth consists the final things you consume: food, appliances, transportation, entertainment, clothes, energy, etc.
Those are real things. They have to come from somewhere. Which means they have to be produced, stored, transported, and sold. By themselves, your cash and your stock portfolio have no value. Those are merely claims on true wealth.
So how can it be possible for everyone to be exponentially increasing their claims on real wealth, without the underlying pie of real wealth itself, increasing at an equivalent rate?
It’s not.
And that’s the painful lesson that gets learned and re-learned as each new generation gets duped and then dumped by an asset bubble.
Sadly, bubbles used to happen only once in a generation. Once those burned by the last bubble have died off, the younger generation has no living memory to prevent them from getting suckered by the next one. But for some reason, our current generation has something of an addiction to bubbles. We've lived through the tech stock bubble, the real estate bubble, and now we're living inside the 'everything' bubble.
What's wrong with us?
My advice is to sell your house if you live in Toronto, or a similarly bubblicious real estate market. Similarly, reduce your exposure to stocks and bonds at these record highs, and develop a wealth protection strategy with a financial adviser who understands the risks in today's markets.
Know what the bubble signs are and be smarter than Newton by standing aside, nodding knowingly, and tolerating your "smart" friends and neighbors.
It’s one of the very hardest things to do, but it’s also one of the most important.
Odds are high you'll be proven the smart one once the current bubble bursts.
And if you haven't read it yet, read our report How Bad Will It Get? in which we detail the tremendous scale of the losses that will result when this Mother Of All Financial Bubbles collapses. It will be a traumatizing time for society, and many, many people will see their wealth vaporize.
The key objective at this time is to position yourself for physical and financial safety. For those who do will be in a position to prosper greatly, as well as offer much-needed support to others, when the coming reset arrives.