The Bear is Uncaged … Again
It’s important to say when you were wrong, especially if you are prone to point out when you were right. Otherwise, you are just boasting in vain conceit. If you point it out both ways, you are just being factual.
I point out when I was right a lot more on this site than in my personal life, but that is because I want to make clear that the Fed and the financial media are without excuse for not seeing the problems the Fed is going to create and for not reporting on them accurately as they happen. So, far almost no one in the financial media sees it. It is also because I get new readers coming through who have no idea what I’ve predicted and others who forget months down the road (as sometimes even I do) what I said.
My big reason for doing this is to show repeatedly that the Fed’s failings can be seen coming from a great distance off because of how wrong the Fed’s plans are to begin with. If I can readily see them coming and say when they’ll happen, then there is no excuse for the Fed to not see how its plans will fail because they have a lot of experts paid a lot more than I make to set them on the right course; a course that has resulted in disaster after disaster for all of us.
Even Ben Bernanke expansions don’t die a natural death; they are murdered, and Janet Yellen said the Fed holds the gun. There is no excuse for highly paid financial writers not to see the disaster that is coming when we’ve been through these cycles before to the point where they are predictable. Worse, yet, they don’t even seem them AS THEY ARE HAPPENING! And we got a huge load of those happening this year:
The financial experts didn’t see that inflation was growing, even as it was happening last year and this year, much less before it started showing up when I was warning in late 2020 that we were entering a time where the Fed’s money printing would finally start to create inflation because it was being done in a time of shortages and doled out to the masses. They didn’t see that inflation was not transitory, even as it kept rising. They didn’t see that failing to predict inflation’s non-transitory rise would force the Fed to tighten even faster and harder and, therefore, more destructively down the road. They didn’t see that reversing QE and sucking money back out of the monetary system would create problems in the bond market. They didn’t see that the combination of inflation fighting and of bond interest soaring would drive the stock market relentlessly into a bear market by taking away its easy money and giving it competition for yield. They didn’t see ALL SUMMER LONG that there was no way the Fed would pivot back to loose financial policy, even though it was obvious that it would not because it CANNOT legally do so when it sees the job market as strong, leaving the Fed with only one mandate to adhere to — maintaining price stability. So, they all kept believing stocks were going to go back up due to a Fed pivot, even as the money that got pumped into stocks got sucked out the financial system and as the economy that forms the foundation for earnings slowed down. They didn’t see a recession coming as we approached 2022, and they even refused to see one after we had two negative quarters of GDP in the first half of 2022. They didn’t see it because they believed the labor market told a different story and, mostly, because they didn’t want to. That’s because they haven’t seen that a labor market that cannot provide anywhere close to the normal level of labor is not a strong labor market and does not indicate a strong economy, but is a broken labor market; and they didn’t understand the very basic concept that, if the labor market is unable to provide the normal level of PRODUCERS, then it is impossible for the economy to have the normal level of PRODUCTION (GDP); therefore, barring some huge boost in labor efficiency, production must drop, and that IS a recession. Finally, they didn’t see that the government buried the third negative quarter of GDP under a blatantly false inflation number.
All of these things they have missed entirely … and are still missing. And that’s a LOT of MAJOR errors! The Fed and all of its pocket politicians and nearly all the writers in financial media and the banks and the brokers keep stumbling along the same horribly mistaken path, while you know I’ve pointed out all of those pitfalls all along the way and even before the way began, saying when they would show up. It’s important, in my view, to keep pounding that message because, unless people realize how predictably horrid the Fed’s path is, we will keep redoing these rinse-and-repeat cycles as I wrote about in my little ebook in the belief that no one can see these things coming. They can’t be helped. And I don’t want to keep doing them.
2022 has, in fact, been the boldest display of proven Fed error, as well as stock-market error and greed and delusional thinking we’ve seen in decades. And, when it all comes down, they will, again, say, “No one could have seen all of this coming.”
Cruising past the cryptocrisis
One thing I did NOT see coming, though I am not surprised in the slightest that it happened, is the massive cryptocrash. I never predicted this major event because I don’t know much about crypto-currencies. I don’t really understand how they work. They are black boxes to me, and I don’t make predictions about things I don’t understand. They were proclaimed to be this great hedge against a crashing currency, and I never really believed they would be that, but I also didn’t know. Maybe they would.
So, I just stayed out of talking about crypo much because I didn’t want to spend the time it would take to deeply understand it, and I didn’t buy any because I fundamentally don’t trust something that works by invisible math and algos that I don’t begin to comprehend. Fed money is much easier to understand because it doesn’t require people to crack completely useless equations with ever more massive computers to try to get an edge on the other equation miners at ever higher costs of energy consumption, just for establishing the value of the money along pathways I know nothing about.
There seemed to be a lot of nooks and crannies in the etherial electronic synapses that either graft or Ponzi schemes could hide in, but that was just how it looked to me as an outsider not willing to invest the time required to really understand it. So, I stayed out. I don’t fault myself for not seeing things coming that I don’t understand and, and I’m thankful, at the same time, for those who have done well in crypto (so long as they have not taken the path taken by Slippery Sam, the fried bankman of crypto) who have supported my writing along the way.
Time to say I was wrong
Today, however, is one of those days where it is time to say I was clearly wrong in my prediction of an October surprise from the stock market and then wrong again to have doubled down on that when I said the series of waterfall events I said was coming finally got started on the last day of October. Clearly, we didn’t see the stock market ride a chute of waterfalls right away, and I won’t try to justify the error. I was just wrong. I ridiculed Zero Hedge for its unwavering trust in the “Two Michaels” at Morgan Stanley and Bank of America, who predicted the start of a big rally in October. The market went on to complete a full (albeit totally typical) bear-market rally.
The error of my ways will not stop me, however, from saying I think that rally, which many saw as the end of the bear market, was nothing but another bull trap like the one we saw mid-summer and the one that came before that. It was exactly that same thing. As I’ve said, bear markets are notorious for heart-stopping rallies.
The important thing here is that the longer pattern of the bear-market trend is still firmly in place, in spite of the October rally that left me as the only one surprised; and it is that longer trend that reveals the Fed’s errors and the errors of its attempts to correct its errors. Rallies within this now year-long bear market have not stepped outside the trend that is happening due to macro-economic reasons and Fed policy with one exception.
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