I listened to a podcast with Dr. Doom who is forecasting permanent stagflation, a deep recession and another financial crisis. Is it really going to be that bad?
The mistake most make (including you, sorry to say) is that they are operating on a linear (long common) framework/model extrapolating from the past. This is fatally flawed if we have transitioned, as I see it, to a high degree paradigm shift into a transformational societal exponential vortex system 'reset'. This is difficult for the vast majority who are 'blinded' by various biases/false beliefs. This process can be characterized by the saying "When one is paid not to see, one doesn't see". Also at play is the conditioned reflex of seeking security, giving rise to deep fears of the unknown, which fosters avoiding uncertainty. It's like someone who, when confronted with a very rare multi sigma asset valuation move, disregards it as 'impossible', or an anomaly not worth considering. Many are they who have been killed literally or financially by such flawed processes. "Just the facts, mam" Joe Friday 1. All debt based fiat currency systems have collapsed. This is a feature of the construct, not a bug. Given enough time, compound interest (which Einstein called a wonder of the universe) works its magic as it evolves into an exponential hyper inflation collapse. 'Printing' is the sure sign the end is nigh! 2. A hyper indebted everything bubble economic/financial system simply cannot withstand what has been characterized as a Monster - INFLATION. Even the MMT system so in vogue notes that 'printing' must be terminated and taxes raised immediately when the Monster is unleashed. This was not done, and so the Monster grew out of control. 3. Once the Monster is out of control, it is a genie that cannot be put back into the bottle. Now if the CBs continue raising rates, the system will collapse as it kills the Bond and real estate markets. If they reverse and 'print' with YCC/bailouts (Japan/GB/EU) they feed the monster which triggers runaway INFLATION and societal revolution collapse. Existential doom loop catch 22. That is what is now occurring, and just in time, as if TPTB get to institute their total control CBDC's, humanity will be doomed to unbearable lives of total slavery a la WEF 'green new deal'. Grub, Gold and Guns! Best. Don
Thanks for your thoughts, Don. You definitely have a friend and comrade in Nouriel Roubini as he feels the same way as you. I do not disagree about unhinged inflation. In fact, I have been warning on inflation for almost 2 years. Even before that I told people that inflation was seen as the goal - by politicians who saw it as the only way out of debt, and by central bankers too worried about deflation/demographics. Whether this leads to civil war or not remains to be seen. The heightened inequality in most economies certainly adds kindling to this fire for sure. However, while I am well aware of the potential for multi-sigma asset moves, having traded derivatives for 35 years, I also pump the brakes a little when those same events are predicted. To me, it is best to be pragmatic and not dogmatic. Dogmatism can lead to losses. Why? Because there are more tools in the toolkit for policy makers than you might be thinking. After all, no one was considering QE before it came to be and not no one expects it to go away. I do think things can be bad but I think I still fall short of predicting a revolution. Thanks for commenting. Best of Luck.
Thanks for your kind consideration, Richard. Are you aware of the paper that Blackrock (trillions of elite dollars under management) presented at the Jackson Hole meetup in 2019? That advised the Fed to take control over the Treasury and predicted a high probability of hyper inflation after the next crisis due to 'printing'. The Fed did what they wanted in response to covid. You also understand I'm sure that the CBs are doomed to failure in their battle with the INFLATION Monster, as there is far too much debt leverage in the global system for them to be able to raise rates enough before the system breaks. Are you aware that it is actually the bond vigilantes that are selling and pushing rates higher, as bond holders/buyers are guaranteed heavy losses due to deeply negative rates relative to the Monster? The CBs are pretending to be hawkish, while actually they know they are destined to need to print to initiate YCC as rising rates push the leveraged financial system over the edge. The Japanese are leading in that, as they have led into printing and are now caught in the YCC doom loop. Energy and wage price spiral is the next shoe to drop pushing rates higher and forcing CBs to print and force feed the Monster into hyperinflation, which is simply a loss of Trust in the currency holding its value. Are you aware that in an exponential environment, its a bullwhip structure where delayed responses suddenly become multi sigma breaks, which creates high instability and panic? The linear mind (majority) cannot act effectively in such a transformed non linear structure. This is all simply an unwind of the hyper paper financialisation of the real economy, and a rapid flow of value back into real goods and services. A rapid repudiation of debt, a transfer of power back to savers away from debtors. (record low rates gives power to debtors, and is unsustainable, as savings are necessary to finance production). This is a major regime shift, and it cannot maintain stability due to the extreme leverage, so a collapse is inevitable. This is the revolution, and humanities only hope to escape from TPTB plans for total control. The evil elite are doomed by their Greed, which has no limit. THEY want it all. This is becoming obvious to the majority. BTW, there is no such thing as Luck, for if there is, then pray tell where is Justice to be found? And without Justice, Life would surely not be worth living. As Socrates said "I exhort everyone to the philisophic life, for an unexamined life is a life not worth living". And that's the issue with the Matrix (societal structure implemented by the evil elite). There is no Justice, Truth or Freedom. That can only be found in Nature. best. Don
You were ahead of the curve on inflation, long duration assets getting smoked, rates and much more; past performance no guarantee of future results but I think you will likely be right on your recession prediction, as well.
But as the market is always forward looking and we are always staying vigilant, I notice a tinge of bullishness in your commentary, but an aversion to committing to the optimism. What will it take for you to switch teams?
UPS reported today and showed us FDX is just lousy and people are actually still shipping many things, GM showed us the pent up demand for cars is only starting to be unwound, the banks have been slightly better than expected but those with auto and other subprime exposures appear to be cautious (how much higher should provisions for losses go? Many like ALLY at post-GFC / all time highs -- the banks want to put those deposits you have mentioned before to work), I don't have high hopes for big tech but don't necessarily care, and Buffett and bellwether BRK will show us rail is robust and I think there could be the deployment of a lotta Buffett Bucks to boot...
As a wise man once said, what could possibly go wrong?
You aren't wrong Fred. Earnings are giving us a message that things are okay. Yes, there are some pockets of weakness. There are companies disappointing. Those that disappoint are punished. Those that give us good sales and earnings do well. I will say that this anecdotal evidence of strong consumer spending suggests this economy might be better than we think. I am alert to this. I don't know if this is my base case yet. However, I will say I have shifted up the odds of my bull case scenario - soft landing - from 10% to 20%. I think the odds of a deflation and an L shaped recovery might be higher at 30% with 50% odds of a base case, modest recession, slowdown in housing and the economy and inflation coming down. So I still lean bearish through the middle of next year. However, I remain vigilant.
I appreciate the article! Although this is a minor point, I'd like to make it. It may be advisable to give less weight to Nassim Taleb's opinion than what he earned 10 years ago. The man seems to have gone slightly off the deep end. I say this as a fan! I enjoyed Antifragile, just as we all did, but it was really Fooled by Randomness that knocked my socks off. A great man wrote those books, but I'm not sure the Taleb we have now is the Taleb from back then.
Unhedged - I didn't mean to give any more or less weight to Taleb's review of the book. I only meant to say that Taleb and Wolf are both regarded and agreed with enough of Roubini that they were willing to write a review. This is probably because Roubini is going to write a review for their next books too. I thought the entire Incerto was terrific and find I use bits and pieces from those books all of the time. Thanks for reading and commenting.
The mistake most make (including you, sorry to say) is that they are operating on a linear (long common) framework/model extrapolating from the past. This is fatally flawed if we have transitioned, as I see it, to a high degree paradigm shift into a transformational societal exponential vortex system 'reset'. This is difficult for the vast majority who are 'blinded' by various biases/false beliefs. This process can be characterized by the saying "When one is paid not to see, one doesn't see". Also at play is the conditioned reflex of seeking security, giving rise to deep fears of the unknown, which fosters avoiding uncertainty. It's like someone who, when confronted with a very rare multi sigma asset valuation move, disregards it as 'impossible', or an anomaly not worth considering. Many are they who have been killed literally or financially by such flawed processes. "Just the facts, mam" Joe Friday 1. All debt based fiat currency systems have collapsed. This is a feature of the construct, not a bug. Given enough time, compound interest (which Einstein called a wonder of the universe) works its magic as it evolves into an exponential hyper inflation collapse. 'Printing' is the sure sign the end is nigh! 2. A hyper indebted everything bubble economic/financial system simply cannot withstand what has been characterized as a Monster - INFLATION. Even the MMT system so in vogue notes that 'printing' must be terminated and taxes raised immediately when the Monster is unleashed. This was not done, and so the Monster grew out of control. 3. Once the Monster is out of control, it is a genie that cannot be put back into the bottle. Now if the CBs continue raising rates, the system will collapse as it kills the Bond and real estate markets. If they reverse and 'print' with YCC/bailouts (Japan/GB/EU) they feed the monster which triggers runaway INFLATION and societal revolution collapse. Existential doom loop catch 22. That is what is now occurring, and just in time, as if TPTB get to institute their total control CBDC's, humanity will be doomed to unbearable lives of total slavery a la WEF 'green new deal'. Grub, Gold and Guns! Best. Don
Thanks for your thoughts, Don. You definitely have a friend and comrade in Nouriel Roubini as he feels the same way as you. I do not disagree about unhinged inflation. In fact, I have been warning on inflation for almost 2 years. Even before that I told people that inflation was seen as the goal - by politicians who saw it as the only way out of debt, and by central bankers too worried about deflation/demographics. Whether this leads to civil war or not remains to be seen. The heightened inequality in most economies certainly adds kindling to this fire for sure. However, while I am well aware of the potential for multi-sigma asset moves, having traded derivatives for 35 years, I also pump the brakes a little when those same events are predicted. To me, it is best to be pragmatic and not dogmatic. Dogmatism can lead to losses. Why? Because there are more tools in the toolkit for policy makers than you might be thinking. After all, no one was considering QE before it came to be and not no one expects it to go away. I do think things can be bad but I think I still fall short of predicting a revolution. Thanks for commenting. Best of Luck.
Thanks for your kind consideration, Richard. Are you aware of the paper that Blackrock (trillions of elite dollars under management) presented at the Jackson Hole meetup in 2019? That advised the Fed to take control over the Treasury and predicted a high probability of hyper inflation after the next crisis due to 'printing'. The Fed did what they wanted in response to covid. You also understand I'm sure that the CBs are doomed to failure in their battle with the INFLATION Monster, as there is far too much debt leverage in the global system for them to be able to raise rates enough before the system breaks. Are you aware that it is actually the bond vigilantes that are selling and pushing rates higher, as bond holders/buyers are guaranteed heavy losses due to deeply negative rates relative to the Monster? The CBs are pretending to be hawkish, while actually they know they are destined to need to print to initiate YCC as rising rates push the leveraged financial system over the edge. The Japanese are leading in that, as they have led into printing and are now caught in the YCC doom loop. Energy and wage price spiral is the next shoe to drop pushing rates higher and forcing CBs to print and force feed the Monster into hyperinflation, which is simply a loss of Trust in the currency holding its value. Are you aware that in an exponential environment, its a bullwhip structure where delayed responses suddenly become multi sigma breaks, which creates high instability and panic? The linear mind (majority) cannot act effectively in such a transformed non linear structure. This is all simply an unwind of the hyper paper financialisation of the real economy, and a rapid flow of value back into real goods and services. A rapid repudiation of debt, a transfer of power back to savers away from debtors. (record low rates gives power to debtors, and is unsustainable, as savings are necessary to finance production). This is a major regime shift, and it cannot maintain stability due to the extreme leverage, so a collapse is inevitable. This is the revolution, and humanities only hope to escape from TPTB plans for total control. The evil elite are doomed by their Greed, which has no limit. THEY want it all. This is becoming obvious to the majority. BTW, there is no such thing as Luck, for if there is, then pray tell where is Justice to be found? And without Justice, Life would surely not be worth living. As Socrates said "I exhort everyone to the philisophic life, for an unexamined life is a life not worth living". And that's the issue with the Matrix (societal structure implemented by the evil elite). There is no Justice, Truth or Freedom. That can only be found in Nature. best. Don
You were ahead of the curve on inflation, long duration assets getting smoked, rates and much more; past performance no guarantee of future results but I think you will likely be right on your recession prediction, as well.
But as the market is always forward looking and we are always staying vigilant, I notice a tinge of bullishness in your commentary, but an aversion to committing to the optimism. What will it take for you to switch teams?
UPS reported today and showed us FDX is just lousy and people are actually still shipping many things, GM showed us the pent up demand for cars is only starting to be unwound, the banks have been slightly better than expected but those with auto and other subprime exposures appear to be cautious (how much higher should provisions for losses go? Many like ALLY at post-GFC / all time highs -- the banks want to put those deposits you have mentioned before to work), I don't have high hopes for big tech but don't necessarily care, and Buffett and bellwether BRK will show us rail is robust and I think there could be the deployment of a lotta Buffett Bucks to boot...
As a wise man once said, what could possibly go wrong?
You aren't wrong Fred. Earnings are giving us a message that things are okay. Yes, there are some pockets of weakness. There are companies disappointing. Those that disappoint are punished. Those that give us good sales and earnings do well. I will say that this anecdotal evidence of strong consumer spending suggests this economy might be better than we think. I am alert to this. I don't know if this is my base case yet. However, I will say I have shifted up the odds of my bull case scenario - soft landing - from 10% to 20%. I think the odds of a deflation and an L shaped recovery might be higher at 30% with 50% odds of a base case, modest recession, slowdown in housing and the economy and inflation coming down. So I still lean bearish through the middle of next year. However, I remain vigilant.
I appreciate the article! Although this is a minor point, I'd like to make it. It may be advisable to give less weight to Nassim Taleb's opinion than what he earned 10 years ago. The man seems to have gone slightly off the deep end. I say this as a fan! I enjoyed Antifragile, just as we all did, but it was really Fooled by Randomness that knocked my socks off. A great man wrote those books, but I'm not sure the Taleb we have now is the Taleb from back then.
Anyways, thanks for a good piece. Enjoyed it.
Unhedged - I didn't mean to give any more or less weight to Taleb's review of the book. I only meant to say that Taleb and Wolf are both regarded and agreed with enough of Roubini that they were willing to write a review. This is probably because Roubini is going to write a review for their next books too. I thought the entire Incerto was terrific and find I use bits and pieces from those books all of the time. Thanks for reading and commenting.