Federal Reserve "Survey of Consumer Finance"

In the chaotic world in which we live, we feel that investors tend to over hype the wrong things and under prioritize the right things. For a decade now many investors have finally succumbed to the central bank narrative and the continued and never old mantra of “buying the dip.” The truth has become so self-fulfilling, that there isn’t even a “dip” to buy. Many pundits have attacked these global markets, have doubted the global markets and even more so have doubted the wherewithal of this rally. See here is the thing about the human psyche, we humans tends to be risk averse, and we tend to question everything, up until the very end. The funny thing about time, though, as it moves forward, it seems to leave in its wake, many investors dismayed, many in disbelief. Many will say, I know I should have been long, I knew this market was going up, I didn’t know exactly why it was going up, but it just keeps going. We have a feeling that many doubters, those patient risk averse, 60/40 allocating types have tossed in the doubting towel, especially over the last 2 years.

Let’s just say the enticement has become too much, despite the fundamentals, despite all that is wrong with every value metric out there, who cares, just buy it! Talk to your friends, talk to Joe Blow on the street, nobody and I mean nobody thinks the markets can fall anymore. They say that it seems expensive, that it should fall, but it doesn’t, can you blame them? We don’t! It’s typical of the human psyche to succumb to unwavering pressures. In fact nobody we speak with calls the equity markets a bubble anymore, which means it’s just being accepted for what it has become, that is the defacto money market for the top 10%. We get it, but one thing we don’t is why everyone we talk to calls Bitcoin a bubble, are they joking, a mere $100bln market cap and that’s a bubble? It pales in comparison to the kind of rehypothecated capital that exists out there. So don’t fall for it, let’s just end the bubble talk any further, for any market in fact, Bitcoin, SP500, Real Estate, forget it, Bubbles no more. Fundamentals no more!

As we have said in many letters in the past, the only thing that matters is DEBT! More and more and more of it, that’s what the Keynesian Monetarists at the global central bank cabal have enthralled us with and come hell or high water its debt that will continue. Our readers should know by now that Debt and Money are one and the same, at least in valuing risk assets. But what if assets can no longer be adequately valued by fiat currencies? What if something like Bitcoin and all its crypto brethren start to capture some real capital? We don’t want you to think that Crypto Currencies are the end all save all, but rather we want you to realize the fact that if the likes of Bank of America and Goldman Sachs start covering a sector like this, it’s best to put yourself on notice. If the likes of that hypocrite Jaime Dimon starts knocking the validity of such an invention, then you better take notice, because that means this thing is bigger than what you may think. Anyhow let’s not lose sight here; we aren’t trying to give a valuation lesson, for our time frames are much shorter now even if we don’t like them to be. The reaction time for news used to be two weeks or so, now down to the hours. Nothing seems to really matter anymore, NK nukes, hurricanes, Middle East clashes, terror events. If nothing matters than what really matters? We hate to sound redundant or even philosophical but it’s hard not to, the markets have become, well anything but markets. They seemed to have morphed into this static centrally controlled command function. So what is an investor to do?

Aside from reading our letter, we think you need to pay attention to the FED. We hate it, we despise it, but it’s what we have and we can’t fight that fact, so let’s embrace it and watch for the signs that will tell us what the potential move that lies ahead might be. The very thoughts right now are focused upon a December hike, followed by a new chair appointment, which at this point seems up for grabs, although Kevin Warsh and now John Taylor seem to be at the fore front. We like Taylor but we feel that his rule needs some debt tweaking and is a bit archaic in the QE world in which we find ourselves in. We have heard that his rule would be calling for a 5% Fed Funds, hah, we laugh at such a notion. Where would the FED get the $100 billion a year to give to the banks? Then again maybe that’s what will be needed to once again in order to save the system. What we are beginning to think is the FED itself doesn’t know exactly what to do. Anyway, what the FED is planning on draining or removing in terms of stimulus, the ECB and BOJ will be adding so we are still in QE mode. So let’s stop this entire accommodation removal bit shall we.

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PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. TRADING FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS. THERE ARE NO GUARANTEES OF PROFIT NO MATTER WHO IS MANAGING YOUR MONEY. THERE IS AN UNLIMITED RISK OF LOSS IN SELLING OPTIONS. YOU SHOULD CAREFULLY CONSIDER WHETHER COMMODITY FUTURES AND OPTIONS IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.

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