‘History Is Moving.’ So Are Markets
Another volatile day on Wall Street found dazed investors reeling anew, as US equities oscillated between gains and losses and bonds sold off sharply, extending last week's declines.
The line worshippers among you will be distressed to learn that the S&P formed a death cross while falling to its lowest levels since June (figure below).
Headed into OpEx, positioning virtually guaranteed more chop. Nomura's Charlie McElligott reiterated the point, flagging "epic 'short delta' and still dange
H-Man, there is no spin that can suggest the current situation is good for equities. It is just ugly everywhere you look.
$US wejaker, stocks weaker, bonds weaker… unusual except for EM economies….sell off is gaining momentum. Watch us all get wrong footed again.
I’m probably too caught up in the current news cycle, but everything feels very surreal as we drift along with marmalade skies.
I’m cobbling together pieces of abstract history and blending a weird vision that hopefully isn’t over the edge here, and I’ll try not to turn this into the longest comment ever posted.
As a starting point, assume Putin’s goal is to give the West the rope to hang itself. Assume part of this puzzle is to burn up global cash and cause future liquidity problems.
For perspective, please turn to the bullet point associated with comrade Reagan giving speech about Star Wars and that whole deal with bankrupting mother Russia.
Next slide. Recall comrade Obama and Sleepy Joe tangled in a credit default mess associated with deficit spending, budgets and eventually the Budget Control Act of 2011, which provided a 10 year period to manage deficit spending. It’s too insane to actually understand where that’s currently at, after the pandemic.
Next slide. Recall comrade Trump being unable to obtain funds for his gold plated walk spanning the southern American borderline.
“For fiscal 2019, Trump demanded $5.7 billion in wall funds, but Congress appropriated only $1.375 billion for border fencing projects”
Fast forward. Almost lost my place, dah… Ok, return to Star Wars as metaphorical vehicle, a Deux ex machina that implies crazy Putin is attacking capitalism in conjunction with the pandemic, in order to use economic fragility as leverage for instability.
Essentially, by playing Russian Roulette volatility explodes everywhere for everyone, but if a global war of sorts evolves, the concept of money is somewhat irrelevant. Hitler used slave labor and patriotic innovation as well as illegal derivative instruments, the famous MEFO bonds. He didn’t need money, he had power.
Anyway, perhaps we run into fiscal drama because of a war environment that becomes increasingly destabilizing and highly polarized and politicized.
What if that instability results in a default and global fragility, where the dollar doesn’t seem as secure? Why else would Putin be willing to destroy his economy, but who would actually go along with that? I don’t see China getting itself sucked into a black hole that it can’t escape from and that unfortunately leaves us with the reality of Putin’s madness. It doesn’t make sense!
First, I think we need to all stop assuming Putin is some kind of genius. He schemed an easy takeover of Ukraine from his 500 foot table deep in his bunker leveraging 7 simultaneous fronts (which is militarily stupid). Obviously this invasion has been a catastrophe for him both militarily and now economically. He’s made so many miscalculations that it’s beyond worth considering how he could have come to the conclusion that this was somehow a “good idea”.
Second, the dollar failure idea isn’t preposterous at this point. We have no plan to “normalize” monetary policy and so we continue on the endless printing road until we hit some future state where nobody wants dollars anymore. I think it’s a foregone conclusion this will happen, it’s a matter of when not if. However, to your point about Hitler, power beats money and who has more military power than the United States? Who has more gold reserves than the United States? Answer: No one. So Putin doesn’t win this by breaking the global economy, we’re already setup for that shift in global economics.
Do we go back to some kind of a gold backed currency? Possibly. Some new DeFi that actually passes as a national currency? Either way, the US is setup for success assuming Tucker Carlson doesn’t convince half the country that Putin is their friend and that we need to overthrow our own Democracy to be more like him.
The graphs that point to a peak now based on previous peaks are always funny. You can always cover any one highlighted peak and find a previous peak that didn’t precede the drop that the highlighted peak is purported to portend. It’s like a party magic trick: amusing but not actionable.