TTo reintegrate our position on what’s ahead, it’s all really very simple:
- The Election of Trump is a spitting-image of the 1928 election of Herbert Hoover.
- Tomorrow in our www.peoplenomics.com subscriber newsletter, we will cover parallels between the 2006-2008 real estate bubble and we’ll compare that with the 1920’s Florida Land boom.
- From Hoover taking the Oath of Office, there were 182 days to the All-Time-Peak as measured by the Dow Jones September 3, 1929.
- The Hoover-backed Revenue Act of 1929 included a tax reduction.
- Later, when the Depression had taken hold, Hoover was forced to raise taxes at exactly the wrong time, thus ensuring the Depression would be twice as long and three times as hard compared with leaving rates alone.
- We compare this with Donald Trump’s pending Tax Cut Plan which is echoes of the 1929 Revenue Act.
- Concurrently, we have experienced the lowest Velocity of Money at M2 in American history.
Moreover, the Fed’s pending rate moves will most likely drive the stock bubble higher as money is already flowing out of bonds and into common stocks.
While this weekend’s report will have projections of how high the ultimate top could be, we are mindful that in financial analysis, it is easy to pick either TIME or PRICE but not both.
And that gets us to this week’s Federal Reserve H.6 Money Stocks report. This tells us how much money the Fed is sloshing into the system:
What should jump out at you is that these two reports tell us something about the nature of the power relations in Washington.
The top table says if you look at October through January, we had 7.5% and 6.1% growth rates of M1 and M2.
When we look at the “sliding” timeframe, bottom table, through February 6, we see M1 and M2 growth (annualized) at 3.9% and 5.8% respectively.
Let’s see if we can wrap our heads around how this works:
First: There is a case to be made – based on this data – that the Fed was “goosing money” during the election/pre-election period. Obviously, the easy money flow made it appear that the Obama economy was somehow magically growing.
Whether this is overtly political – of just how running the dual-mandate (high employment, stable economy), or whether it was overtly political can be argued endlessly. We have neither the time, nor inclination, to bother with that discussion because we are in the “It is what it is..” position.
Which is looking more and more like a deliberate bubble that will go off with a huge bust as we work through this year, or next.
As of 2012, the total valuation of the U.S. Bond Market was about $37 trillion dollars. At the same time, the valuation of the U.S. stock market was around $21 trillion.
You need only to think about the return on investment to understand what happens.
When the prevailing YIELD (amount of interest paid) is going down, the price of a bond is increasing.
Let’s say you bought a bond paying 10% interest when prevailing rates were 10%.
Now imagine prevailing rates drop to 5%. Suddenly that 10% bond is paying twice prevailing rates so its price goes where? UP!
Sadly, the opposite is true.
When prevailing rates go up, the bond price comes down.
That money goes on walk-about looking for something better in the way of returns.
The stock market, becomes the recipient. Bond money flows into stocks.
Result? A mega-bubble like the one we’re in.
But wait! It gets even better!
The Underlying Asset War
You see, not only do we have the dynamic of Bond Money flowing in, but we may have some Real Estate Money flowing, as well.
This dynamic arises because refinancing real estate at extremely low rates, enables big real estate moguls to pull out oodles of cash – which is also walking around looking for something to do.
While it MIGHT be possible to build more shopping malls and such, the reality is that there is a well described war going on between brick and mortar retailers (like those closings announced in 2016 by Macy’s which is working through the system right now) and the online retailers like Amazon.
Given that malls might not be a great investment, would you like to buy some shares in solid American companies like Caterpillar?
This, in a nutshell, is why we could see the market continue to work higher. Much higher.
In the intermediate term, almost assuredly within five years, the market bubble will collapse.
You will simply wake up one morning and the market will be down 3,000 points on the Dow – or more!
But for right now, we are chilled on immediate prospects for collapse. There is a lot of hot air and hot money left to be poured into this bubble, which is what we track over on Peoplenomics.
But it shouldn’t be too long.
When Ure sells a fair-sized asset like an airplane to bolster his trading account, it might mean he’s expecting a series of large moves.
If you inferred that, there’s hope for you – and your net worth – yet.
Media Has Removed Trump from Office
At least some in the NB.E. seem to have.
However, how well the presidential press conference played this week depends very much on your “observer state” going into the event.
If you are staunchly anti-Trump, then we’d suggest your read “Candidate Trump Tries to Salvage Embattled President Trump.”
If, on the other, you favor Trump, the New York Post’s “Sorry media – this press conference played very differently with Trump’s supporters.”
What’s really happened – not to beat this too hard again, but the Old Line Media has been obsoleted by New Media and Social. Pissed at losing “exclusivity” (which becomes ad money) the old line media is furious and bent as hell on taking down Trump.
Trump, on the other hand is working those non-shill channels for all he’s worth. That includes a “campaign rally” in Florida this weekend. Couple in-person appearances with Twitter and suddenly who needs networks?
Especially with the silly-sap kids who know virtually nothing about politics other than what an increasingly liberal college establishment has pumped into either heads.
I realize this will sound harsh, but no one under the minimum age to hold the office of President should be allowed to write about presidential/national politics. The me, me, me generation is clueless as to how grown-up life works.
We will simply sit back now and watch Trump go on the offensive.
The All-Seeing Eyes
While the story about how “AI-Powered Body Cams Give Cops the Power to Google Everything They See…” sounds alarming, apparently they aren’t yet in use in places like, um…Berkeley….
Frankly, I’d be a whole lot less worried about body cams than about the whole globalist War on Cash…and toss in Civil Asset Forfeitures, which regrettably, Donald Trump seems to support.
Again, we are giving Trump some slack as he’s a newbie, but his Forfeiture position, the Sec. Ed. and Ajit Pai for the FCC chairmanship are matters we see as “blown opportunities.”
But I’m sure there’ll be more. But hope springs that he’ll learn from his mistakes. Toning down the tweets would be great, too. Use it for press releases, not so much rants, thank you. (knock knock…anyone home?)
Searching the Shadows
You know, there may be a HUGE Trump coup coming, though, when even the NY Times worries on the front (web) page this morning “As Leaks Multiply, Fears of a ‘Deep State’ in America.”
Oh, you mean like that “un-elected layer of GS-15/16’s and up we’ve been pointing to for years? Well bless my soul…
Off to another cuppa. E-commerce retail data out at 10AM eastern will be worth looking into as we spin down the week. It will be a way to scale where “the front” is in the bricks vs. clicks war.
Other than that, back to research on how the Florida Land Boom of the 1920’s paralleled the Greenspan NoDoc Bubble.
TTFN – CU Tomorrow or Monday…