Lame Thinking Is Bull's Secret Sauce

February 27, 2019

Rick’s Picks avidly follows the stock market’s ups and downs each day, as well as the way it is influenced by the Fed’s silly obfuscations. On some days it feels as though the cheerleaders at The Wall Street Journal et al. are overdoing it, generating enough hubris to stand economic logic on its head. But let’s not kid ourselves. Whether this rally has a week to go, a month, or even a year, the central bank’s narrative of an economy so strong that it could overheat and produce inflation is a con-job. For in fact, every penny of debt we’ve accumulated over the last 40 years represents pent-up deflation waiting to implode in some unscripted moment-from-hell.

Economists have made a fine science of explaining these boom times with data that ignore a darker reality. Let me clarify just how grim our predicament is with a simple question: Do you actually believe that millennials who can’t find good jobs, who owe $55,000 on average and live with their parents will be able to foot the bills for the Baby Boomers’ Medicare and Social Security? Try and argue that monetization, or perhaps an explosion in household savings, will cover the shortfall and you’ll only sound like an imbecile.

Public Pension Sinkhole

The public pension system is in equally bad shape, and although this tectonic sinkhole is at least talked about, no one has a clue about how Illinois, California, New York, New Jersey, Connecticut and a bunch of other profligate tax-and-spenders will be able to keep retirement checks flowing when their respective treasuries are empty. For now, though, nearly every dime that states can raise with new taxes or deliberately mischaracterized bonds is going toward pension liabilities. And while the pols would have us believe the added revenues will help keep the public retirement system solvent, we can be pretty certain the next bear-market/recession will lay waste to even their most conservative assumptions.

That’s why keeping the bull market going is such a crucial concern for policymakers. Unfortunately, market leadership has narrowed to the point where the health of the stock market — or rather, the illusion of health — has come down to manipulating a small group of stocks higher and higher. One of them is Boeing, whose shares are in a parabolic blowoff (click on inset). Unlike Google and Facebook, which are just ad agencies on steroids, Boeing actually gets its hands dirty making real goods. This is rare in an age when so much capital is thrown at virtual providers like Uber (last valuation: $160 billion). It also explains Boeing’s wild popularity with money-men in need a good ‘story’ to hawk their wares.

Uber’s Competition

Do those who get paid to throw Other People’s Money at Uber et al. even understand that the ride-hailing company is as vulnerable to creative destruction as the taxi fleets it has wrecked? It’s not as though the entry barriers are formidable. There are probably a thousand entrepreneurs in America capable of starting their own version of Uber with homegrown software, plentiful labor and good word of mouth. Uber insiders had better pray that these ‘independents’ don’t start turning up on Sand Hill Road, bound for SFO and SJC.

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The symbol for silver ‘AG’ comes from the Latin word ‘agentum’ meaning silver.

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