Royal Bank of Scotland to investors: 'Sell everything'

The SNAP IPO is indicative of everything I have posted. It burns through more cash than it has actual revenue. And its growth has been slowing. Yet, there was a buying frenzy over the first 2 days of trading (stock actually got whipped today). The only thing missing is a sock puppet mascot on this one. A lot of retail investors are gambling right now and they are clueless about how much they are overpaying for a piece of that company. They have no clue. They may as well be spinning a roulette wheel -- if they are thinking long-term, the roulette wheel will offer better odds.

But this is what happens when institutions and the relatively few number of people who do have money (because most people are strapped) are awash in cash due to central banks that have created dangerous amounts of leverage. It creates all kinds of misalocations of capital -- including an equity bubble right now that is at valuation levels beyond 1929 and 2007 and just below the levels in 2000.

The stock got whipped today, but when it peaked last week, its market cap was greater than Sony's and Ebay's and HP. ... They are all profitable companies -- and generate way more revenue than Snap. Snap burns through cash. It loses money. That IPO may go down more than the ridiculousness that is Tesla when people look back on the central-bank created debt market bubble that led to this equity bubble. It is the new poster child for how capital gets misallocated when when a price administrator hijacks the debt markets and exists to keep trying to make it cheap to borrow.

You end up with things like this -- you also eventually end up with an inevitable debt crisis and all of the bubbles they cluelessly created popping all at once. Unless something crazy happens in which SNAP transforms its business in a way it has given no indication of, it will be a casualty.

 

Yup. I was wrong. I thought that what was going on then was the catalyst to end the phoniness. The ECB and BOJ stepped up their asset buying / QE to keep markets propped up and have blown the bubble a little bigger. But central banks can't stay in control much longer.

My "analysis" of global financial markets still is that you are still knee-deep a monetary-induced asset bubble that is going to end with a VER Y serious financial crisis. It is inevitable -- something phony (central planners creating a ridiculous amount of credit and leverage) has driven up asset values and created debt bubbles all around us.. And it is way bigger than what we saw in 2007/2008. Just because I can't time when something artificially being propped at insane levels of debt collapses, doesn't mean that I am wrong.

The fact that you seem to take so much glee in making it into a "trading" or "market timing" conversation ignores the gist of most of my posts, is annoying. I should have never weighed in on my bet that what happened after the sell off last year was a dead cat bounce. I was wrong. Of course, you'll revive that post and ignore the 95 percent of my posts that more the point of what I have said on here.

 

It is imminent, not eminent. And I have never said anything is imminent. I also don't make blind predictions. My posts have spelled out in detail WHY we have dug a massive debt hole, via interest rate manipulation and central banks hijacking debt markets with asset buying. And how that has blown asset bubbles all around us -- and created debt messes that will make the housing bubble look quaint.

It's kind of like saying that someone in 2004 or 2005 spelling out exactly how the Federal Reserve was blowing a housing bubble by not letting the debt markets discover lending rates through price discovery was a broken clock that would eventually be correct.

Just because what they were clearly seeing didn't result in "imminent collapse" doesn't mean that the substance of what they were saying was wrong.

 

There is no such thing as "safe" because our markets can't have real price discovery with the mess they have created. Real interest rates are being artificially suppressed. That makes it way too cheap to borrow, allows cheap credit to entities that wouldn't be lent to in a free market, and all of that leverage and credit drives up asset prices. It's the effect of monetary inflation -- they have exploded the global M2 money supply.

They will do it as long as they can to prop up the mess they created, until they completely lose control and create a financial crisis from the recklessness. All they can do is rob savers to benefit debtors -- to keep trying to create more and more debt. They need more and more debt to hold off a deleveraging -- which is going to happen one way or another, and is going to end up with a lot of people with car loans defaulting, students walking away from their debt, a commercial real estate bubble popping, oil drillers that way overleveraged themselves going out of business and defaulting on their loans, etc.

If you try to be "safe," you will be robbed -- by Mario Draghi (who I am listening to drone at the moment), Janet Yellen and Haruhiko Kuroda. You will lose money in real terms. So that has pushed people into riskier and riskier behavior. A lot of those people don't understand the risks they have taken, because the markets have been distorted by the interest rate manipulation. It is why global equity markets have run up so much, even though the global economy has grown anemically and earnings have actually DECLINED over the time they have run up. Logically, anyone should understand that values of businesses don't go up when they are struggling -- unless something phony is happening.

You are fucked, basically. You can join the herd and gamble and hope that those central banks can blow bubbles forever. I think that is foolish. Or you can try to be "safe" and watch as they rob you of the safe return markets would give you in a free market. That is the point of what I am saying -- savers are being robbed and your purchasing power is being eroded. For decades it was being done slowly - but over the last 7 or 8 years, it has been done at an insane rate. That has created a HUGE global debt burden. It is going to end with a credit crisis. The debt levels are much greater than they were in 2008.

Personally, I have made a decent amount of money trading -- mostly the currency markets -- the last few years. I take what I earn, and I am mostly concerned with capital preservation.

You asked where are the masses going to flock. ... my guess is twofold. I still thing gold and silver are going to continue to beneficiaries. I have bought A LOT of physical gold over the last 10 years. Logically, it makes sense to me that they are better stores of monetary value than fiat currencies that are being actively devalued. It's why the price of gold in terms of every major currency has increased dramatically over the last few decades. My other guess (and Jim Rogers always says this) is that if / when there is a financial crisis, the U.S. dollar will be the biggest beneficiary -- at least on a short-term basis. I think that is probably right. It's reflex, and perception -- that the U.S. is the safest house on the block. My problem with that is that the U.S. has run up massive amounts of debt and has had a central bank that has shit all over the currency over the last decade, and continues with a stated policy of trying to decrease the value of the dollar by 2 percent a year. That is insidious. So longer term, no way I want to own dollars. I don't understand why anyone would. Since the Federal Reserve was created, the dollar has lost more than 99 percent of its value. It is what they exist to do.