The Bubble Epoch Gets Worse
Yes, it’s the age of miracles. The Bubble Epoch. The silly season.
And it just gets sillier and sillier.
Christine Lagarde, who holds the top spot at the European Central Bank (ECB), announced that she’s going to continue pumping up the money supply by 17 billion euros per week.
She says it is going to add 1.8% to Europe’s growth over the next two years. That is, somehow the fake money will be magically transformed into real wealth.
How does she know that?
Oh, Dear Reader, is that a serious question? Of course, she has no idea…
And by the way, if her €17 billion per week would add precisely 1.8% to the economy, why not print €18 billion and get 1.9%, we wonder? Or €100 billion?
Apparently, none of the journalists who cover the ECB thought to ask… So we’ll just have to go on wondering.
What strange voodoo is this… that 17 billion per week is the exact number of euros needed to raise GDP by 1.8%?
A Good Deal
Meanwhile, her co-delusional over in the U.S., Federal Reserve chief Jerome Powell, says he’s going to continue the money-printing, too – at the rate of $30 billion per week.
His aim is to hit 2% inflation – not 2.1%, not 1.9% – which he’s convinced is some sort of sacred number guaranteeing uninterrupted growth and full employment.
The Fed is buying $40 billion worth of mortgage bonds each month, driving down mortgage rates to the point where you can get a 15-year mortgage at a negative rate.
That is, your mortgage interest will be less than the going rate of consumer price inflation.
A good deal? Apparently.
And it’s likely to be a better deal if tomorrow’s inflation makes today’s mortgage rates even more negative.
Housing Market Update
Capitalism never strikes out completely. It just swings at whatever wacko spit-balls the authorities send its way.
Here’s an update from yesterday’s Stansberry’s Morning Market Update:
Let’s see… Fewer houses for sale. Higher prices. Inflation!
Swing for the Fences
But the wilder the pitches… the wilder the swings… and the more foul balls.
Facebook – a timewaster! – was worth more than $1 trillion dollars yesterday. Tesla, a company that loses more than $1,000 on every car it makes, was not far behind, at $650 billion.
An investor gives a SPAC (special-purpose acquisition company) his money. The SPAC looks for something to buy.
The targets are coy. They know the score. There are no “walks” in the SPAC game. If the SPAC makes no purchase within two years, it must give the money back to the investors. And then, the SPACsters lose money.
If they make a purchase, on the other hand, even if it is a bad one, they get 20% of the deal, just for putting it together.
Won’t they swing at almost anything?
Meanwhile, a serious investor can only laugh. He needs facts… figures… profits!
If he is buying a soap company, for example, he might reasonably enquire as to how many bars of soap the company sold last year… and at what profit margin.
But even asking the questions puts him out-of-step with the whole team of uncoordinated lunatics who make up today’s financial world.
Profits? Airbnb, Dropbox, Casper, Blue Apron, Lime, Lyft, Peloton, Pinterest, Slack, Snap, Uber, WeWork, Wayfair, Zillow – none of them are profitable.
And here’s the latest from Bloomberg:
$3 Billion Home Run
But at least there are a couple of capitalists who hit a home run, with $3 billion in fees coming their way from the most reliable payer in the world, the U.S. government.
What’s their secret? Simple. They set up websites and ran ads to offer free money. No kidding.
One ad on Facebook: “Literally free money for those who qualify.”
Who qualified? Almost everyone.
Another ad you might have seen on billboards or buses spelled it out: “Get up to $50,000 in PPP. Apply now.”
The two small companies partnered with banks to hand out Paycheck Protection Program cash.
Everybody involved made money. The banks made the loans (guaranteed by the feds). The loan recipients got the money and, generally, didn’t have to pay it back.
But nobody made more than these two companies, Blueacorn and Womply. According to an analysis by The New York Times, they have $3 billion to split between them.
But wait. Whose money are they divvying up?
Oh, Dear Reader, don’t ask such silly questions.
Just enjoy the game.
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