Value is anything but Subjective
Tech charts and settles for 2-17-22
What can we say, not much other than if you didn’t read our last post entitled “regime change Plan Accordingly” then we highly suggest you do. Today’s market action should come as no surprise, yea the Nasdaq got destroyed today but lets be honest…this is far from over.
Billions of dollars conditioned to the free money FED PUT are about to be vaporized and no VALUE IS NOT SUBJECTIVE and Reversion is a bitch. So when you have all the believers continuing to tell you ala Jim Cramer style days before Bear Stearns got smoked, too be patient realize this… TIME is a decaying concept and nobody is immune.
I never understood the monetarist regime and the warnings will fall on deaf ears, we know this. So just to jar your memory, watch this clip from 2008:
Click here, Mad Money on Bear Stearns
Yea we know this isn’t about NINJA loans, CDO² or the collusion of all the major investment banks and rating agencies and dishing off product mezzanine tranche risk layers to yield starving investors. No this is much worse, this is about Trillions of stolen profits drawn forward via monetary stimulus all for the illusion of prosperity.
Does this work?
You bet your ass it works and why does it work ole wise one?
Well when you have a general economy that has to abide by natural laws of organic economics, households that have budgets, households that have fixed budgets and then you spend all this stimulus under the guise of “no cost” well it works until it doesn’t. It works till the socialist drumbeats start rolling because everyone wants something for nothing and UBI is the soup du jour of oligarchy authoritarian billionaires. Those types who are immune from the rules, above the law, or shall we say, those that make the laws.
If you haven’t figured out by now that society is very unhinged globally, well you aren’t paying attention. Its like the Romans paying the barbarians not to attack, well eventually the costs outweigh the benefits and you have to renegotiate or fight. Get the picture?
We also recognize this is not a housing led crisis, although we know affordability is well outside the bounds and higher rates and zero MBS buying will force prices down in areas that have no business of being elevated. The southern states are a bit immune for now as Covid has made it very clear which states will continue to lose patrons at the expense of supporting their pseudo benevolent state and county budgets, good luck with higher discount rates. Let’s see how many villages can pass referendums to keep up with pension costs. Eventually people pack it up and leave.
So where does it leave us? Well it took the FED a century to accumulate $4 Trillion in balance sheet and just a mere 7 years to get to $9 Trillion. For those that can’t see the false prosperity, you just ain’t lookin!
Yea its a boom for asset prices and a boom for the ultra wealthy as massive concentrations of wealth and economic imbalances are almost assured at this level of largesse. What it also does is that it assures that zero rate environments and or bond buying from central banks cannot end, for if it does, well then the game is up.
The central banks know it and we know it and there will not be any such “smooth transition.”
It will be choppy, it will be messy and all we can do is pick our spots and evaluate our risk. More appropriately you need to evaluate your risk vs your expected time frames and if your time horizon isn’t very long, well then its stage left for you. Its adult swim only time!
As far as the SP500 well, the value is certainly nowhere near present levels, not with the FED raising and certainly not with the prospect of a 2.5% Fed Funds:
Also we may want to keep an eye out in the Repo market for some real clues to where the naked are swimming, the money tide has rolled out and stress always shows up in the overnight rates first. Here is a little chart to start digging more into as these were the largest players during the last repo debacle in 2019 and we are certain the needs are even much greater this time around:
Alright that’s it as for the biggest loser today the Nasdaq, down a whopping 2.9%:
Till next time…
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