How Many Rabbits?
Logic says this had to end. History says it’s got to end. And yet they keep finding rabbits. I’ll be the first to admit, that I NEVER thought they could kick the cans down the road as far as they have. Yet, here we are.
I’ve been in this game for quite a while. I started in 1994 doing seminars for local investment clubs. That migrated into the first newsletter in 1996, and in 1997 we launched the web site.
All along the way, there were ills and evils that I pointed out, about how the economy is fake, the economic reports were fudged, the debts were unpayable, and on and on. And yet, through the magic of Central banking, they’ve managed to keep the wheels on this thing. It truly is incredible if you think about it.
I fondly remember having conversations with the late – Great Bob Chapman, and we’d discuss how the dollar would eventually evaporate, how the assassination of Lehmans/Sterns was the beginning of the end, and how the debt monster would swallow us whole. And yet, the dollar survives, Wall Street is bigger and uglier than ever, and the debts? Astronomical in scope.
Each time the economy was on the ropes, and it looked like there was no way they could save the day, they’d come up with some goofy program. Each time our debts got to “unfathomable” levels, they’d simply add more debt. Each time the most respected (from my point of view) people told of the horrors we were going to face, “somehow” the crash wouldn’t come.
No matter what the ill, they’d find a way to paper it over. When inflation was soaring, and no President wants to be in charge when inflation is soaring, they simply came up with Hedonic measures. In that twist of logic, if hamburger was getting too expensive, they figure people will go to chicken instead. Since chicken was cheaper than Hamburger, Uncle Sam announced that inflation had fallen.
Really? Yeah. And so it went. If the new wave of TV’s was 4 times more expensive than the old ones, it wasn’t inflation. Nope, according to them, it was cheaper because it did so many things better. Same with computers. The box might cost more than your old one, but it was so much faster and efficient, that according to Uncle, it was cheaper. Only Uncle Sam could tell you that a more expensive unit is cheaper than it used to be. And, he did.
When GDP was found to be lacking, they simply changed the components of what they count. Depending on the country you lived in, that might include prostitutes, cocaine, and old Mayberry RFD reruns. No I’m not kidding. There’s nothing that will boost your GDP numbers than adding in hookers and blow.
When unemployment started getting out of control, and again no President wants that on their record, they simply changed the way that unemployment is measured. As I’m typing this, if we measured unemployment as we did in 1995, it would be 21%, not the 3.8% you hear about daily on CNBC.
When the jobs numbers didn’t fit what the administrations were preaching about the economy, they came up with the BLS’s “Birth/death” model. For instance just this past Friday they told us that 223K jobs were created in May. Was there really? Nope. See, a full 215,000 of those supposed jobs came from the Birth/death model.
If you read the Birth/death model, you’ll walk away talking to yourself. They use some pretty twisted logic to get to their numbers. But what the bottom line is, is that according to them, for every “X” amount of people that lose their jobs, “X” amount of them actually go out and open a business and hire people. Now, there’s no proof of these people, no tax receipts, etc. But it is reported as fact. Do they really exist? A few of them probably do. But 215K?? Uhm, no.
When the housing/mortgage market went so crazy that people working part time at McDonalds were buying 600K dollar homes, it was only a matter of time until it all imploded. Well, it did. And from the wreckage came “Quantitative Easing”. The Federal Reserve announced it would buy 600 billion worth of mortgage backed “toxic” securities, to get that crap out of the regional banks, and mortgage lenders.
When they got tired of bailing out banks, they came up with the Cyprus concept of “bail ins”. You are now an unsecured creditor to the bank, and if the bank gets in trouble, they have every right to take your money.
I could go on and on with these “rabbits” that they’d pull out of their hat any time things were getting ugly, but the one that tops them all in my estimation was the implementation of “negative interest rates.”. Never in the history of mankind was there such a thing as negative interest rates, where you literally have to PAY THE BANK to make a deposit.
Obviously, one of the reasons for that mutation of reality was to force people to spend their money instead of keeping it at a bank. But the concept is so foreign to me, that I shudder each time I think about it. That said however, what could be more incredible than our very own Dollar, which has now for the first time dipped below 4 cents in value? Yes folks, the vaunted dollar, which started out as being worth, well, a dollar, is according to the Fed’s, worth 3.9 cents. Yet somehow the wheels don’t come off.
So here we are, in June of 2018. The banks that blew up in 2008 are bigger than they were then. The debt, which was unpayable in 2008 is even bigger now. The fed’s have been talking about “normalizing” rates, and reducing their balance sheets, but if you look at their collective balances, they’ve reduced nothing. They can’t really, because “Who’s going to buy it?”
Over in Italy, things are morose. The whole Euro experiment has been a disaster since first implemented in 1999, and to this day, Greece, Italy, and of course Spain are still struggling with it all.. Italy’s debt to GDP is over 130 and rising. Greece was never fixed. Spain’s on the ropes. Mario Draghi, who said he’d do “anything” has accumulated over 4 trillion on his balance sheet at the ECB. How’s that going to get worked off?
Then we have Argentina, and Venezuela. Those two basket cases are zombies. The poor people dealing with the fall in their currencies, which has been horrendous, is so sad. We’ve seen video’s of empty store shelves, people rummaging around in garbage bins, and people getting robbed in broad daylight on street corners. It’s a mess.
As you can see, the world has a lot of problems, and somehow, some way, they generally find another rabbit in their hat full of tricks. Yet we ask, what rabbit do they have that can solve the trillions in debt? Each time the US or Europe is on the ropes, they come up with some new program, so new QE, some new twist, to kick the can down the road. One might think we’re have run out of road by now, but no. Life goes on, and the economy creaks and groans its way forward.
Ever wonder why so many hedge funds did so lousy over the last few years? It’s really simple. Hedge funds are generally run by intelligent people, people that know in their hearts that logically, this can’t go on. So they didn’t go long of stocks that are trading at nosebleed levels. They even went short of stocks. And what happened? Stocks just kept going up. All their logic was no match for a Central bank with a printing press.
So, here in the states, we’ve spent untold trillions of dollars since the 2008 crash and what do we have? A 2% GDP? A true unemployment rate of 21%. A larger portion of over age 65 people still working than ever recorded. 44% of our population that couldn’t find 400 bucks if an emergency hit them. And yet because of all the money printing we’ve got an all time record stock market.
Logic says this had to end. History says it’s got to end. And yet they keep finding rabbits. I’ll be the first to admit, that I NEVER thought they could kick the cans down the road as far as they have. Yet, here we are. Am I to believe that they can keep all these plates spinning for ever, without one falling and starting a domino effect? Well I don’t. Yet again, I thought that 3 years ago.
My point is this: We haven’t reinvented history. Recessions haven’t been eliminated. Crashes are not extinct. But I have to give them credit, they’ve magically kept things going. So, just about the next time you say to yourself “That’s it they can’t keep this up any more”, just remember how many times you might have said that in the last 5 years. For me, it’s been several, and yet “here we are.” For how long, I do not know. But I refuse to believe that something really spectacularly major isn’t lurking out there. I wonder how big their rabbits get?
As he became more “in tune” with the global economic process, he noticed that one of his best customers traded stocks and options on a daily basis. With Mr. Rinear’s views on the overall economic situation and “Charley’s” ability in picking stocks, they found a winning combination. But it still wasn’t complete.
Once introduced to the intricacies of the equity markets, it didn’t take Mr. Rinear long to realize that he had a knack for predicting the everyday flows of the stock and options markets. He began to attend trading seminars and training camps with the desire to learn how to make profitable trades on a daily basis.
One thing became abundantly clear — none of the classes gave him the total picture about how to accomplish his goal. Something was still missing in regards to how to make a living by trading stocks and options. Likewise, he realized that not all opportunities came in just stocks and options. Sometimes it was a quick move in precious metals or Treasury bonds. Other times it may have been a move in a currency.
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