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The Deeper Dive: Bubble Brains Everywhere


“I thought they would allow this [the Great Financial Crisis (GFC)] to correct properly, and then they didn't, you know? They bailed everybody out, and nobody went to jail, and, you know, that's when I really, really, really got pissed off, because there was a lot of wrongdoing going on at the time and it was all condoned, and, you know, some of the people that did the stuff became our public heroes.”

Wolf Richter

And, so, the years and years of extreme financial manipulation began, and so they continue today.

The years since the Great Financial Crisis have been one giant and ridiculous ride that has attempted to deny reality in order to avoid the pain of making meaningful corrections in how our economy works, which has gone from major money printing in 2008 to bigger money printing in each subsequent numbered round of QE to the absolutely grandiose money printing necessary to save the economy during the insane Covid lockdowns that we needlessly created for ourselves.

Each round has had to be bigger and had to last longer with the Covid round being the most extreme of all the extremes. And, yet, people forget where this marathon roller coaster of money printing began back with the first quantitative easing in the 2008 crisis.

So, of course, history repeats itself because ... WE NEVER LEARN!

It has developed into a mentality that now always believes the next round of massive money printing or cheap money is about to come and that actually wishes for enough economic trouble to force the Fed to get back to its business of artificially creating markets so that investors don’t even have to worry about business fundamentals because they know the bottomless Fed funds will have to go somewhere and that will always be into financial assets.

However, the bubble mania in bonds is breaking already due to returning inflation, and the bubble baloney in stocks is starting to stink past its sell-by date. Two articles today ask if the outrageous stock bubble is getting ready to implode. One of them even says the latest crazed bull rally may go down as the shortest bull market in history. The biggest hysterical surges do come before the biggest crashes, especially when the surge is built out of nothing but hot air and hope. (These articles are highlighted in bold below, and I’ll let them make their own interesting cases.)

“Passive strategies are now somewhere north of 40% of all assets, and they're all investing under the exact same rubric: what's the market capitalization of the stock, right? That's all they care about. They don't care about what the fundamentals are, they don't care about the direction, they don't care about the momentum components etc.”

Mike Green

Worse than that! Today’s traders don’t even care if the company makes money! They sometimes don’t even seem to care if it ever will. I’ve said in the past that stocks have become mere chips for the rich to gamble with in the casino (placeholders as it were, empty of intrinsic value but traded as if they have value) where investors are just speculating on the flow of Fed funds. Which stock will the money pour into? Or as one of my long-time patrons put it, perhaps in better terms, they have become non-fungible tokens (NFTs) where the bet is not on the value of the company, but just on how many people will pile in.

As he wrote in a note to me,

The Fortune 500 companies are doing horrible, laying off, yet the stocks are all doing well (for now). Think of every stock like an NFT. Tesla is the board apes yacht club, and dollar rent a car is like toenail clowns—The community of believers has replaced fundamentals—for now.

It is the movements of the lemming masses that drive price. So, momentum piles in based on overriding and often exuberant sentiment. Humans can be annoying for how easily they forget something like how things looked in early 2007 when the masses were still all fired up in the community of belief about real estate rising forever just before the Great Financial Crisis; but then came all years that followed, which damaged the US economy forever. The economy has never been stable since then. It has always required massive Fed stimulus ever since the first round of major Fed interference to keep pumping hot air into the balloon-sized bubbles the Fed was inflation in order to “save the economy.” Every time Fed support has been withdrawn, the economy and markets and even banks have failed.

The main thing we really need to save the economy from is the Fed itself, with its endless interference, which has turned markets into pure casinos. Then we need to fix the underlying flaws in the economy and market system that we refuse to deal with, such as the thing we should have avoided most—bailing out bad banksters. That only allows the perps to perpetuate their crimes and their greed, while all of us provide financial backstops to make sure they become even bigger.

We need to jail those who willfully and negligently break their banks or hedge funds, as Obama and the establishment chose not to do in 2009; and we need to seize ALL of their personal possessions to help repay those they damaged. To do this, we also need to overhaul corporate laws to make certain there is NO way ANYONE can use incorporation to shield their wealth from court judgements in the case of legal wrongdoing.

We talked about “moral hazard” way back when the first bailout began as a risk. Well, now we’ve seen nothing but moral hazard perpetuated in each round of bailouts. Let the greedy utterly fail due to their own greed. That way you don’t keep the greedy in power. Instead, we even rewarded them with plum positions in government and funded their bloated bonuses. Who ever did better in government places than Goldman Sachs executives during the Trump era (not that it doesn’t happen under all presidents).

If you let capitlism be capitalism and do its dirty work and not just its lovely work of rewarding people—if you let it ultimately crush people whose greed ran out to far and even those who banked with them—then the greedy banksters never get so powerful in the first place because their greed-ridden banks never survive to become even more too-big-to-fail, and their customers learn the hard way to be a lot more careful about which mega bank they bank with; and the bad ideas and corruption get washed away.

Instead, as I wrote in my many articles at the time, which I collected a couple of years ago into a small book, George Bush said “I gave up my capitalist principles to save capitalism.” Balderdash! What he did was give up capitalism to save greedy capitalist pigs by socializing their worst risks and losses! In doing so, he greatly damaging true capitalism and left us forever since in this bizarre world where all “investors” simply look at when and where the Fed is going to place more of its endless bailout/stimulus money. They focus on what direction all that money will flow … so they can become part of the community that pools where the money pools.

The cycles of the Fed needing to save the economy with ever greater interference repeats because we never correct the problems. We just repeat the causes of the problems in ever bigger rounds because we are never willing to face the necessary pain of true correction, and we never learn that pumping it up all over again to avoid that pain just leaves us with an even worse bubble to solve laterand that’s why I wrote this simple little book that I just mentioned to lay out that period where all these mistakes began with a little humor along the journey and to lay out the actual corrective action that needs to happen:


DOWNTIME: Why We Fail to Recover from Rinse and Repeat Recession Cycles: The same characters who created bailout bonanzas for banksters in the Great Recession are doing it again. Shall we let them?

(If you’ve read the book or do decide to read it, I would appreciate a review on its Amazon page. I say that not knowing how good or bad the review may be but that such things are what they are based on whether I did my job, so that part is on me.)

It is also why I started writing The Great Recesison Blog years ago, which has now been streamlined into this site, It is also why Wolf Richter started his site, In the following video, Richter lays out the situation that happened around the GFC that frustrated and angered him so intensely (just as it did me) that he had to start writing about this for years to come, just as I felt I had to do.

That period marked the end or real capitalism and cascaded into a time of endlessly socialized losses and fascist government investment and bank-making giveaways to the wealthiest of corporate cronies, such as we had never seen before. Now it is endless because the longer we do it, the worst the correction will be if we end it. Obama did it. Trump did it. Biden is doing it on steroids with his high-tech giveaways, which Richter talks about in the video below.

Here’s his story, which runs much the same as mine. In it, he explains how, in such very basic terms, the solutions deployed by the Fed and feds during the GFC were the exact opposite of what needed to happen. We took the easy route of printing money just to avoid facing our pain, putting us endlessly into situations of even greater peril: (That is what happens when the know-it-all meddlers, who really know nothing with any wisdom or sense, get in the way.)

The rest of this Deeper Dive continues after the headlines below (which are available for free to everyone on Mondays). It delves into the stock and bond markets’ grossly errant rate-cut mania that became prevalent after November 1, 2023; and it looks particularly at how those foolish bets have been unraveling in the last month as the reality of inflation, which stock and bond markets were willfully ignoring, began to force itself upon investors, disrupting their delusions. It begins with Richter laying out how that mania is now falling apart.

Let me also leave you, if you are not a paid subscriber with full access to Deeper Dive articles, with this interview from a week ago:

GoldSeek Radio Nugget - David Haggith: Fed Rates vs. Economic Realities

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