Royal Bank of Scotland to investors: 'Sell everything'

There is nothing to adjust. Stocks are overvalued. Some idiot can trail me around tell me what the voices in his head "clearly" tell him I "predicted." He can ignore my post, clip a few words and come up with some market timing prediction he wants to make this about. But it doesn't relate to what I have actually posted. It's beyond annoying at this point.

As to what I have actually said. ... A massive expansion of the money supply has created a huge credit bubble that has created asset bubbles all around us. Much of that leverage has made its way into U.S. equities and has driven up stock prices to absurd levels. Earnings -- what drives stock prices when the world hasn't been turned this ass backward -- are in the dumper. On any metric you can come up with, if you actually are having the discussion I am, stocks are SUPER expensive. Not just expensive. Batshit insane expensive.

I see a clear cause and effect -- credit leading to excessive speculation. The kind of situation that has always ended with massive thuds. It is something that has played out many times, most recently in 2000 and 2008 -- those times, for the same kinds of reasons, except with less of a credit bubble creating those asset bubbles. As central banks have gotten more and more out of control, it has created a series of escalating crises and I am certain the next one is going to be even bigger. This time, it is playing out to a much larger degree, because we have had ZIRP for 8 years and trillions of dollars of asset buying the likes of which has never been experimented with. I can be more detailed about just how much credit is sloshing around and how it has fed various bubbles -- and I have in other posts.

I know how this ends. It is *still* playing out. That isn't me not adjusting my perspective. It is me seeing 40 percent of the world at negative interest rates -- which is absurd in and of itself -- and the Federal Reserve itself sitting with a $4 trillion dollar + balance sheet of crap debt that it bought up and overpaid for, which it will never be able to unwind, as rates here sit near zero going on a decade. It's untenable. One of several things happen -- either they step away, for example, actually raise rates to any significant degree, and then stocks do what they did after December when they tried to dip their toe in the water for only 25 basis points (which is why the backed off over the last 2 months, which is what has kept stocks holding up for the time being). Or they try to unwind that balance sheet -- and it's the end of way more than a giant equity bubble.

Either you understand what I am discussing or you don't, but I am not any more wrong about this, for example, than Kyle Bass was wrong in 2006 when he was telling Bear Stearns risk management people that they were insolvent -- whether they actually knew it already or not. Just because the credit event that brought them down didn't happen for another year doesn't mean he was wrong or that he needed to adjust his perspective.

I am fine with being wrong about what I am suggesting. But if your (not you, but anyone's) asinine understanding of any of my posts is some market timing prediction of some sort, it's just dumb. Read my actual posts, not some idiot trailing me around putting his words into my mouth over and over again and ignoring the conversation I actually tried to have. Fundamentally tell me why in an anemic economic growth environment -- a recovery that has plain sucked -- in which earnings are now dropping off a cliff, why stocks deserve to be valued more expensively than they have ever been in history, short of the periods preceding massive stock market crashes that were caused by similar types of manipulation. Then you can tell me specifically why I need to adjust my perspective -- why what I am suggesting is wrong. I'm all ears on THAT conversation -- if anyone was having it.

 

My posts are hilarious only because you are responding to some dumb "chicken little" thing that you created.

I have been posting for years now that central banks have fucked up our markets by creating a credit and borrowing mess, and they have created massive asset bubbles that are going to pop with nasty results for a lot of people. This is now 9 years in the making really -- as they used the financial crisis in 2008 to hijack the global economy. It has gotten to places that nobody would have believed 9 years ago.

This goes way beyond a stock market bubble being created by credit creation and monetary debasement for as long as they can prop up their mistakes and keep it all from imploding. I was not making blind market timing calls that you keep attributing me. I said over and over again, that stocks are going down from these levels. ... It is a certainty WHEN either central banks lose control or when they try to back away and unwind their balance sheets and allow rates to rise. It looked like they may have finally lost control earlier this year when the market was reacting to China's debt mess (which hasn't gone away). Of course, I said if that wasn't the catalyst to prick the balloons, there are endless other potential catalysts lurking. And they still are.

The pullback last August and earlier this year was because the Federal Reserve was threatening to stop spiking the punch bowl -- with their endless yapping. It all turned out to be bullshit. I said multiple times that the only thing that could prop up the mess they have created was them backing off their threats (which they have -- losing all credibility_, other central banks (the ECB, BOJ, too) doing more to keep credit flowing and pushing people into riskier and riskier behavior (which is exactly what has happened recently). You never selectively quote those parts of my posts when you are mischaracterizing my post and distilling them into a "Ragu predicted" narrative.

That is exactly what we have been getting -- the ECB, Bank of England, Federal Reserve, BOJ, etc. have been frantically engaging in a currency war where the stakes have gotten higher since those posts. And things are more artificially manipulated than they were -- and things are also more unstable. A third of the developed world @ negative interests -- which pushes people into riskier assets. We have the Federal Reserve having backed off of the empty threats of reversing their currency debasement they made for a year without doing anything, and the FedfFunds futures factoring more of a chance of more quantitative easing from them before we even get a 25 basis point rate hike. Central bank balance sheets are in the trillions of dollars as they overpay for assets to prop up debt markets. They have destroyed liquidity and with their desperate moves, they have created a game of people front running them. It has created a global financial system that is in bad shape. European banks -- notably Deutsche Bank (I am not even talking about the Italian banks, which are teetering) -- are right where Bear Stearns and Lehman were the first time around in the mid 2000s.

After Brexit, every central bank from the Bank of England to the BOJ to the Federal Reserve used it as an excuse to do more currency debasement. And markets have been eating it up for the time being. I'll say what I have said over and over again in these posts. There is nothing fundamental (what should drive equity prices in an unmanipulated market) going on here. Earnings have fallen off a cliff, even as stock prices ran up. Stocks are more expensive right now than they have ever been in history, including the valuations in 1929, 1987, 2000.

Unlike those bubbles, also, it also has nothing to do with regular people buying stocks. Average Joe isn't even enjoying the boost to his net worth on paper. It's all financial manipulation starting with central banks. Companies are borrowing trillions of dollars for next to nothing and creating massive debt overhangs that will dog them for years, and they are using the money not for typical investment purposes (equipment, plant, etc) but to buy back their stock and raise dividends. Savers who have been getting punished by those central banks are forced to buy those riskier assets to get any kind of income and/or return.

Sorry you don't get that. But it is unsustainable, and it is a huge mess that is going to end badly. You can not suppress interest rates forever without eventually destroying those markets, at which point rates will rise on their own no matter how much they try to price fix them.

If you had sense, it wouldn't be an endless gotcha joke directed at me. You'd try to understand my posts and feel the sense of sadness over the permanent depression they put the global economy into, the years of future growth they are robbing us of, for desperate attempts at propping up something that is going to collapse eventually anyhow. It is reckless.

However far they can keep a lot of borrowing and debt creation going, and keep stock prices from coming down to NORMAL valuations on the back of that debt (U.S. stocks on average are trading at more than 20 times trailing earnings), it will all be a fantasy. Even if they somehow take the DOW to 20000 before we get a crisis worse than the one we got in 2007. They can not keep up that kind of manipulation forever, and what they are doing to cause it makes the fallout worse with each day. Whatever the catalyst that does finally bring it to an end -- and I still think it is coming way sooner than later at this point -- stocks will be at levels FAR below where they are right now when they can no longer sustain the phony world they have created with more and more credit creation and asset price inflation (while typical people suffer financially).

 

BTW. ... When I start to post (especially when I beleaguered by this thread being revived by LTL), it is impossible for me to do a short, pithy post that is as stupid as "chicken little, ha ha." No matter what I do, I am talking about things that are more complicated than a quick post will allow, and I am trying to cram too many things in, and I am not sure I am easy to follow. And I never have the time to do it right.

I saw this presentation a few days ago from Grant Williams. It is a time investment on your part, but I think everyone should be watching this right now. When we get something much worse than 2008 was (and we are going to get it; as I said this goes WAY beyond a phony stock market bubble that is going to get pricked and come back way down), you may understand better what created the messes in the first place.