This Is Not A Cyclical Downturn – This Is The Final Storm
Inside today’s Daily Journal…
Essay: A Turning Is Coming In 2029
Subsidies versus competition
The Strait is open… for now
U.S. LNG’s one-year outlook
Chart Of The Day… Taiwan Semiconductor
Today’s Mailbag
The stock market is in the midst of one of its most intense, fastest rallies ever.
But, as you’ll see below, I believe this rally is a warning, not a victory.
What we’re seeing in the market today is the result of an enormous, global credit inflation. Investors are panic buying – desperate to get back into financial assets that can protect them from the ongoing currency debasement.
We are in the very last days of an enormous sovereign credit bubble, which has been the greatest inflationary period in the history of the world’s economy.
All of this will end by 2029.
But, before I explain that timing, let me address this incredible rally.
What’s Driving This Rally? Inflation Expectations
Assuming the market closes higher today (and it’s up about 2% as I’m writing this) the market will have risen in 11 out of the last 12 trading days.
That means the market for U.S. stocks is up almost 15% in less than two weeks.
Since 1957 there have only been three other rallies like this – an intense, 10-day period, leading to a new high. (Hat tip: Bespoke Research)
October 1982: the clear beginning of a new bull market, with high-quality stocks trading at single-digit multiples and at the end of a long period of rising interest rates
March 2000: The final blow-off top of the greatest stock market mania the world had ever seen (to that point)
November 2020: COVID vaccine announcement breakout, meaning the end of the pandemic was at hand
The first two events were “normal” market action. These kinds of huge, intense moves in securities prices are what you should see at the very beginning, or the very end, of long bull markets.
But the COVID rally? And this one?
These are the kind of panicked buying we’ve seen, again and again, since the U.S. government began its massive buying of Treasury obligations following the Global Financial Crisis. What investors know is, sooner or later, the government is going to print more money and buy more bonds. That’s the only way to finance this war in Iran or all the other out-of-control spending (and graft). Investors have learned the best way to protect yourself is with gold and high-quality stocks.
But… where will this all lead…?
Luckily, we don’t have to guess.
The Fourth Turning
In 1991 two historians solved a seemingly impossible puzzle of history.
Why does catastrophe seem to arrive on a schedule?
