Sure looks like a blowoff top in progress. No guarantees, but as they say “Looks like a duck, swims like a duck, quacks like a duck, probably is a duck.”
NVDA wandering about $920 a share. Where is Scooter McNealy (Sun Micro) when we need him: “At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”
Per John Hussman: “There are only two points in history when likely 10-12yr S&P 500 returns fell this far short of Treasury yields: August 1929 and December 1999.“
Notably missing from yesterday’s FOMC statement, the usual “The US banking system is sound and resilient”. Between massive crime waves in Democrat-run cities and WFH, the steady move to online shopping and higher interest rates, commercial real estate (CRE) values are being crushed. Add to that the impaired value of Treasury portfolios and you are hearing “Danger, Will Robinson.” Oh and the remedy that John Hussman argues arrested the GFC, the removal of mark-to-market, has already been deployed for those Treasuries as the Fed will accept them at face value rather than market value.
And as of Tuesday’s report, the FY24 increase in Federal debt passed the $1 trillion mark. Notice how the Treasury comments are careful to talk about “budget deficit”. But there are off-budget items – well, you can’t budget for wars, can you? You just write the checks.
Edit: January ended with Federal debt of $34.191 trillion, an increase of $1.024 trillion or 3.1% over the first third of FY24.
The Economic Cycle Research Institute (ECRI) reminds us of the cyclical nature of inflation. Why are there cycles?Because there is a feedback loop as the economy – for example, people’s consumption pattern – responds to inflation. Here are a thousand words from ECRI:
The red lines are ECRI’s international long lead and intermediate indexes.
“…in 2008, at least we had a slow moving train wreck. Right now people are just frozen, hoping that we have a reason to go back down to the zero bound so that they can move those office buildings off of their balance sheet, refinance those junk bonds…”
Danielle’s background with the Fed and Powell means that she is focused on the monetary influences on the economy. Economic activity is slowing quickly and some sectors (CRE this means you) are in outright deflation. The elephant in the room, however, is the fiscal side. Spending is, literally, out of control and there is an election next fall. Desperate Democrats have successfully bought votes in the past and the temptation to do it again will be strong unless there is a huge and unexpected improvement in Biden’s popularity and polls. As Danielle has admitted on X, if money (“stimmies”) is sent directly to consumers again then inflation will go through the roof.
Warren Buffett’s friend and right-hand man, Charlie Munger, has passed at 99.
“The big money is not in the buying or selling, but in the waiting.” “A lot of people with high IQs are terrible investors because they’ve got terrible temperaments.”
I'm an independent investor. I make my living from the returns on my investments and have done so for more than 20 years now. My background is in IT, everything from sysadmin through datacenter manager through hardware and software product management. marketing and development to CTO. Plus a side trip in banking. I sail and fly.
Financial Reality 
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