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February
07
2018

Is The 9-Year-Long Dead-Cat-Bounce Finally Ending?
Charles Hugh Smith

Ignoring or downplaying these fundamental forces has greatly increased the fragility of the status quo.

The term dead cat bounce is market lingo for a "recovery" after markets decline due to fundamental reversals. Markets tend to bounce back after sharp declines as participants (human and digital) who have been trained to "buy the dips" once again buy the decline, and the financial media rushes to reassure everyone that nothing has actually changed, everything is still peachy-keen wonderfulness.

I submit that the past 9 years of market "recovery" is nothing but an oversized dead cat bounce that is finally ending. Here is a chart that depicts the final blow-off top phase of the over-extended dead cat bounce:

Why are the past 9 years nothing but an extended dead cat bounce? Nothing that's fundamentally broken has been fixed, and none of the dynamics that are undermining the status quo have been addressed.

The past 9 years have been one long dead cat bounce of extend and pretend, i.e. do more of what's failed because to even admit the status quo is being undermined by fundamental forces would panic those gorging at the trough of the status quo's lopsided rewards.

This 9-year dead cat bounce was pure speculation driven by cheap central bank credit and liquidity. Demographics, environmental degradation, the decline of middle class security, the erosion of paid work, the bankruptcy of public and private pension plans, the global debt bubble, soaring wealth and income inequality, the corruption of democracy into a pay-to-play bidding war, the destruction of price discovery via market manipulation by those who have turned markets into signaling devices that all is well, the laughable distortion of statistics to mask the real world decline in our purchasing power (inflation is near-zero--really really really), the perverse incentives to leverage up bets in financial instruments that have no connection to the real-world economy--none of these have been addressed in the market melt-up.

Rather, ignoring or downplaying these fundamental forces has greatly increased the fragility of the status quo. Gordon T. Long and I discuss these fundamental forces in our latest half-hour video program, 2018 Themes (29:46 min):

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition.Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

 

At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.

I was raised in southern California as a rootless cosmopolitan: born in Santa Monica, and then towed by an upwardly mobile family to Van Nuys, Tarzana, Los Feliz and San Marino, where the penultimate conclusion of upward mobility, divorce and a shattered family, sent us to Big Bear Lake in the San Bernadino mountains.

The next iteration of family took us to the island of Lanai in Hawaii, where I was honored to join the outstanding basketball team (as benchwarmer), and where we rode the only Matchless 350 cc motorcycle on the island, and most likely in the state, through the red-dirt pineapple fields to the splendidly isolated rocky coastline. In 1969-70, this was the old planation Hawaii, where we picked pine in summer beneath a sweltering sun.

We next moved to Honolulu, where I graduated from Punahou School and earned a degree in Comparative Philosophy (i.e. East and West) at the University of Hawaii-Manoa. The family moved back to California and I stayed on, working my way through college apprenticing in the building/remodeling trades.

I was quite active in the American Friends Service Committee (Quakers) and the People's Party of Hawaii in this era (1970s).

I next moved to the Big Island of Hawaii, where my partner and I built over fifty custom homes and a 43-unit subdivision, as well as several commercial projects.

Nearly going broke was all well and good, but I was driven to pursue my dream-career as a writer, so we moved to the San Francisco Bay Area in 1987 where I worked in non-profit education while writing free-lance journalism articles on housing, design and urban planning.

Within a few years I returned to self-employment, a genteel poverty interrupted by an 18-month gig re-organizing the back office of a quantitative stock market analyst. I learned how to lose money in the market with efficiency and aplomb, lessons I continue to practice when the temptation to battle the Monster Id strikes.

Somewhere in here my first novel was published by The Permanent Press, but alas it fell still-born from the press--a now monotonous result of writing fiction. (Seven novels and I still can't stop myself.)

I started the Of Two Minds blog in May 2005 as a side project of self-expression, and in an unpredictable twist of evolutionary incaution, that project has ballooned into a website with about 3,500 pages that has drawn almost 20 million page views.

The site's primary asset may well be the extensive global network of friends and correspondents I draw upon for intelligence and analysis.

The blog is #7 in CNBC's top alternative financial sites, and is republished on numerous popular sites such as Zero Hedge, Financial Sense, and David Stockman’s Contra Corner. I am frequently interviewed by alternative media personalities such as Max Keiser, and am a contributing writer on peakprosperity.com.

 

 

www.oftwominds.com