Unstable Mountains: A Landslide is Ready to Happen!

Now that all longterm Treasury yields have risen to elevations above the 5% level, we’ve entered a rarified financial atmosphere that drastically raises the risk for stocks, which have attained ludicrous heights of their own, given the crumbling state of global affairs all around them. The fractured strata of these mountainous valuations have been welded together by mere water in the form of ice that is now thawing under the heat of these rising bond yields, and the strata now sound like they are grinding against each other and getting ready to slide as thawing yields turn to flowing lubricant, rather than a bonding agent.

Expect an extreme collapse when reality finally manages to thaw clear through investors’ sleepy heads, but who knows how long those suffering their own altitude sickness can hold it together? Who knows how long something that looks like a solid mountain to many can hold itself together before it entirely crumbles in surprise like Nepal’s Langtang Lirung peak?

High tech has returned to its summit of being the sole strength holding up the stock market’s mountainous averages, but the profits reported by high tech are fake profits in the one sense that matters: They are built mostly out of the stock gains of all the shares that corporations have purchased almost incestuously in each other ventures. So the profits represent nothing more than their own behemoth abilities to run each other’s stocks up in value because of their huge access to cash and credit. They are purely speculative paper profits that can vanish overnight.

Those fake profits that all the market makers claim are evidence of a “strong business economy” will instantly turn into losses when the terrain starts sliding downward. This large portion of corporate earnings has nothing to do with the services any corporation is providing for its clients; so, such earnings provide no evidence of a strong business economy. This whole mountain is effectively the biggest most complex Ponzi scheme in market history in that it is just supporting itself with its own bets.

This is unlike any market we’ve ever seen in that illicit intercourse between corporations is now being reported as profitable trade, but who am I to argue? Prostitution has always been lucrative, even if a high-risk trade that produces nothing. The market’s corporately intertwined nature based on nothing but its own ability to purchase fantasy profits that everyone knows will not, at best, materialize from the actual production of these enterprises for years, sets the market up for systemic, rapid collapse, but I have little solid idea of when such unstable bedrock will fail; however, the time will come when the summit topples off like that mountain in Nepal.

The current situation actually looks more like the mountain in Germany that I reported on in Thursday’s headlines where it appears the entire mountain is in a slow-motion state of imminent collapse as dust rises day after day from age-old cracks all over the mountain’s face that have never dusted before, and pebbles and occasional boulders tumble on all sides of the mountain. The mountain is continually and audibly rumbling in hoarse mumbling tones even though it is not volcanic.

We’ve never seen a collapse like this if it happens, so geologists don't appear to know if a warning should be sounded. It is more like a “What on earth is going on here” kind of situation. Yet it is Germany’s highest peak, just like this is the stock market’s highest, most-impressive peak ever; so, if it does crumble under all of its own ponderous and seriously fractured weight as the ice in its veins thaws under the extreme recent summer heat, loosening the layers that have been wedged by frost but also welded by ice, it may be the collapse of a lifetime. (I’ve reposted the video of the German mountain below to save you from having to look it up.)

Maybe the crumbling stone of this enormous mountain that seems to be buckling under its own weight will all find a way to settle into a new equilibrium of repose made of large blocks stacked timorously on top of each other, but stable for awhile longer as we move back into winter’s freeze, again locking the rock back up. Maybe it won’t do as the mountain in Nepal did for similar reasons, surprising everyone when a peak that looked like solid rock gave way and slid to the distant valley floor and slaughtered thousands. Pity the villagers, however, who wait underneath the German mountain’s rumbling mass to find out.

Maybe the same is true for this mountain of stocks, but pity the investors who are standing beneath this top-heavy, poorly supported stock market if it suddenly gives way, as appears increasingly likely.

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