Ninety seven years ago in Tennessee a train wreck killed 101 people. It was shocking, unexpected, and devastating.
In the year 2000 the Tech-Wreck was unexpected, the NASDAQ market crashed, and $Trillions of paper wealth disappeared. Most investors were shocked and their savings were devastated.
The housing market crash/financial crisis/train wreck of 2008 shocked most people, destroyed retirement plans, and caused $Trillions in paper wealth to disappear. Many global economies have not yet recovered.
Few people see the train coming that wrecks their financial lives…
Although everyone knows that markets, such as the NASDAQ in 2000, don’t rally forever, most of us are shocked when the crash occurs. (“No one saw it coming.)
Although everyone should know that real estate prices do not rise forever, in 2006-07 most Americans believed that the real estate bubble would continue inflating. Politicians, realtors, and Wall Street continually reassured homeowners. (“No one saw it coming.”)
BETWEEN DENIAL AND DELUSION LIES A THIN ZONE OF CLARITY. In that zone of clarity we realize that train wrecks occur, printing money only increases the wealth of the political and financial elite, our financial leaders have created bubbles in stocks, bonds, and currencies, bubbles always pop, AND BUBBLES DO NOT POP PAINLESSLY.
In 2015 most people realize that we can’t get “something for nothing,” but our actions often indicate otherwise. Examples are:
- We are currently struggling in a financial crisis largely caused by leverage and debt. The financial and political elite have assured us they will solve the crisis with more leverage and debt. Denial and delusion!
- The Federal Reserve and other central banks are “printing” dollars, euros, yen, and pounds and they have assured us that Quantitative Easing will help their economies. Denial and delusion!
- Central bank and government policies have reduced interest rates to zero or below, destroyed pension fund returns, boosted US student loan debt over $1Trillion, manufactured bond and stock market bubbles, exported much of western gold to Asia, pushed global debt over $200 Trillion, and they have assured us their policies are working. Denial and delusion!
- Politicians promise free food, housing, cell phones, income, and much more, and we should know better, but we still elect the politicians with the most convincing “free stuff” promises. Denial and delusion!
Another train wreck will occur. This is not pessimistic or cynical, just factual. The Tech-wreck of 2000 and the financial crisis-wreck of 2008 were not one-time isolated events. Nothing of substance has changed to prevent the next “train wreck” from crashing our stock and bond markets. Leverage has increased, debt is much larger, and people in the clarity zone hear rumbling ahead. We are rushing down the wrong track while living in a world of denial and delusion.
“Bubbles Never Pop Painlessly” from Michael Pento
“Our central bank has been deluding itself into believing it can easily escape from its nearly $4 Trillion expansion of the monetary base and 7 years of virtually free money. But that is a spurious belief. Bubbles never die slowly and always bring about dire consequences. The bigger the bubble the worse the backlash – and never before in the history of economics have central banks distorted market prices to this extent.”
“Good on You, Alexis Tsipras” from David Stockman
“Late Friday night a solid blow was struck for sound money, free markets and limited government by a most unlikely force. Namely, the hard core statist and crypto-Marxist prime minister of Greece, Alexis Tsipras. He has now set in motion a cascade of disruption that will shake the corrupt status quo to its very foundations.”
“But what it means is that there is now doubt, confusion and fear in the gambling halls. The punters who have grown rich on the one-way trades enabled by the money printing central banks and their fiscal bailout adjutants are being suddenly struck by the realization that the game might not be rigged after all.”
From Jim Sinclair:
“They will never learn, but why should they? These institutions are gambling with your money, not theirs. They win and they whack it up between themselves. They go wrong and you lose in the trillions. There is a potential for an uncontrolled nuclear financial reaction in this outrageous form of greed driven madness.”
“My point is this, the only thing holding markets together is confidence… and the only thing keeping confidence from being shattered is the belief central bankers are and will provide a “free put” to all markets.”
“… when trust evaporates, credit will cease entirely. Without credit, the world will stop spinning. Everything finance and many things real will be gone.”
“And this financial disease is going to slay the patient. History is very clear on this point: debt kills. [Emphasis mine.]
Greece long ago reached the point of no return where they were borrowing money just to pay interest. Now it’s time for brutal honesty; game over.
The best example of brutal honesty is across the pond in Puerto Rico – America’s Greece. The governor of Puerto Rico, Alejandro Garcia Padilla, did not mince words when he described the island’s prodigious debt:
‘The debt is not payable. There is no other option. I would love to have an easier option. This is not politics, this is math.’”
THE GREAT TRAIN WRECK OF 2015 – 2016 IS BEGINNING. Between the delusion of “something for nothing,” and the denial of believing that our financial world was fine yesterday so it must be great tomorrow, lies the clarity of realizing the financial well-being of several billion people is currently threatened. It was the same before the Tech-wreck of 2000 and the financial crisis of 2008. As it was in 2000, is now, and ever shall be …
IT IS NOT NECESSARY TO RIDE THE TRAIN INTO THE WRECK!
The Deviant Investor