It’s Not 2008, Don’t Worry, It’s Fine!

by John Galt
June 1, 2016 21:30 ET

NOTHINGTOSEE_EVERYTHINGISFINE

The stock market is possibly poised to break out to new highs, just like it threatened to do in 2007. As the rest of the economy was in shambles, the hucksters in financial media and so-called stock advisors made a cottage industry on selling to willing pension funds, speculators, and individual investors the stocks of the very corporations and banks that they knew were already technically insolvent.

Then came the Obama administration after the crash and he was presented with a deal by the banksters and the Fed that he could not refuse.

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Apparently according to many of the stories now leaking out from his former insiders, he was told that if he did not green light nationalization of the automakers by stealing the companies from shareholders and bond holders, along with giving the major Wall Street  banks and brokerages whatever they want, they would allow the system to continue crashing and burning until America was essentially Argentina, leaving Obama with four years of pain and economic misery for which we would never recover. In exchange for “promises of support” (aka, contributions to his foundation so he would be worth close to $1 billion when he left office), the banksters would juice the system, create a false recovery and assist with the propaganda that America was hurt but not killed by the incompetence of the Greenspan/Bush era.

Eight years later, everything is fine right?

DOGFIRE

Uh, no.

Let’s start with these terrifying charts which has not been corrected despite the Federal Reserve’s Beige Book claims today that “labor(employment) conditions were “tight.”

2016_APR_LABORPARTICIPATIONRATE_FRED_jgfla

If the claims are so precise in the Federal Reserve’s Propaganda Release, er, Beige Book, then why is the Labor Participation Rate stuck around 62.7%; a number from way back in the Jimmy Carter depression era when women were just starting to enter the workforce in large numbers. Or perhaps this number should compliment the chart above:

2016_APR_NOTINLABORFORCE_FREDjgfla

But that’s fine, right?

ITSALLFINE

Of course why pay attention to the real estate crisis that’s about to hit and harder than 2008. We’ve been watching television, listening on radio non-stop hearing how a “rocket” mortgage will get a buyer into a home at rocket speed, and that all of the issues of 2005-2009 are fixed so it’s all fine. Or is it? From WolfStreet.com:

Last Time this Happened, the Housing Market Collapsed

Excerpted:

What might that mean? According to the Times: “Many say the sudden surge in hyperprice homes – often built and sold by speculative investors – is the ultimate bubble signal.”

And when was the last time this sort of pile-up happened? In 2007 and 2008, just as the housing market was beginning to spiral down and as the Financial Crisis was beginning to mature. So now, the same signs are popping up once again.

But it’s fine? Here is the latest current new single family home sales chart via the Federal Reserve Economic Data site (FRED):

2016_APR_NEWHOMESALES_1971_jgfla

ross_im_fine

Maybe household creation and single family home buying will return to this century’s level in my lifetime, but I doubt it. And it’s fine.

Of course, Janet “I’m not Ben” Yellen will tell everyone that things are a booming and inflation is a threat (sort of late on that one) so she’ll have to raise interest rates in June or July; or August; or September; or October; or November; or December…

Then again, China might check her hand before she can act. After all, there’s no bad news coming from that economy right?

From Bloomberg on May 29th:

China Default Chain Reaction Threatens Products Worth 35% of GDP

Excerpted:

The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China.

WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other. Such holdings may have swelled to as much as 2.6 trillion yuan ($396 billion) last year, based on estimates from Autonomous Research this month.

The trend has China watchers worried. For starters, it means that bad investments by one WMP could infect others, causing a loss of confidence in products that play an important role in bank funding. It also suggests WMPs are struggling to find enough good assets to meet their return targets. In the event of widespread losses, cross-ownership will create more uncertainty over who’s vulnerable — a key source of panic in 2008 when soured U.S. mortgage securities triggered a global financial crisis.

Those concerns have become more pressing this year after at least 10 Chinese companies defaulted on onshore bonds, the Shanghai Composite Index sank 20 percent and China’s economy showed few signs of recovery from the weakest expansion in a quarter century.

But don’t worry, that’s not all, there’s more fine news:

China has a terrible new problem

China could be about to plunge us all into a world of pain

China’s Economy Is Past the Point of No Return

This is the scariest chart in the Chinese debt market right now

CHINA_PRIMARY_ISS_CANCELbijgfla

Excerpted from HSBC via Business Insider at the link above:

Year to date, there have already been 12 public bond defaults involving more than RMB7.8bn of principal exposure, exceeding the total amount in the previous two years.

At the same time, a series of credit events concerning state-owned enterprises (SOEs) and local government funding vehicles (LGFVs) reduced already fragile investor confidence in credits assumed to have government backing.

So no big deal, they start a war with Taiwan or Japan and the market booms again, right?

And that’s fine.

WEJUSTHAVETOACT_LIKEEVERYTHINGSFINE

Lastly, just to  reassure my readers that everything is fine, Hedgeye published a fascinating article last month with their version of the “scariest chart” courtesy of former Federal Reserve Bank of St. Louis Economist Dr. Daniel Thornton:

2016_APR_DRTHORNTON_SCARIESTCHART_jgfla

This excerpt from the article linked above should provide the proper perspective:

 Once again, household net worth has increased dramatically. Since the end of 2012 it has increasing by nearly 100 percentage points to 640% of disposable income. This is scary; not just because it is an incredibly large rise in wealth in a short period of time, but because it happened twice before with very bad consequences.

Whew. I thought it was bad. But then again since the three bubbles in the last 18 years is only paralleled in history by those of 1837, 1893, 1908, and 1929, I just think that’s fine and we will all be okie-dokey, right?

I could add so much more like the next wave of the PIIGS crisis starting with Spain and Greece, the BRexit, valuations at absurd levels like a +26 P/E on the S&P 500, but hey, it’s all fine and all is well. So do what your government and stock broker tells you or if you trade for yourself, watch the MSM financial media and have a nice day. After all:

ANIMAL_HOUSE_ALL_IS_WELL

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