Thursday, September 16, 2021

The Mother Of All Bubbles - Are We In For An Unprecedented Crash? (Part II)

 …continued from Part I. 

Hopefully I didn’t bore you with ancient history and you are now reading …

Part II - The Big Six 

The basic idea behind this series of posts is that I have never before experienced such extreme conditions in the economy, geopolitics and markets in 40 years as a finance professional. Same holds going back further in history.

In my opinion, these are the most worrisome underlying fundamentals today:

  1. Scale: everything is larger and bigger. Global population, GDP per person, debt, consumption, pollution.
  2. Speed: computers have made everything faster. Communications, transactions, manufacturing, transportation, logistics, decision making. Reaction to anything is nearly instantaneous.
  3. Climate change and habitat destruction: we are destroying our human habitat at an unprecedented scale and speed.
  4. Risk appetite is at an all time high: Stocks in the US and EU are trading at heroic multiples and interest rates are zero or negative. Even recent bankrupts (eg Greece) and companies with junk ratings are borrowing at near zero interest. Central banks’ gusher of money is completely obscuring the dangers.
  5. Generation gap: young people who grew up with game and chat apps view markets as just another game. Their heavy participation in daily “meme” trading is very apparent and defies all common sense ideas on investing.
  6. End of Empire: the US was the undisputed global Empire for the past 100 years. This is no longer the case, as a resurgent China is now more determined and ready than ever to claim primacy, whilst America is riven with internal political, social and economic divisions. The previous switch of Empires created WWI and WWII - and it didn’t even involve a direct confrontation between the old Empire (British) and the new (USA). It was just Germany and Japan who thought they could squeeze into at least some of the vacuum left by Great Britain. Today, the confrontation is direct: China vs USA.
….. to be continued


  1. dun worry Hell, you right well. Always a pleasure to read. =)

    To follow up the statements by you and camabron on inequality, I feel it is not so much inequality but the fact that the inequality cannot be justified.

    However,... and here is the important point, ... many of us are also inconceivably richer than other people around the world... say those in sub-Saharan Africa or even some parts of China and Southeast Asia. Sure, we may be intelligent and work hard... but are we really a thousand times more productive than them?....

    And here lies the problem. Most of the people who complain about inequality, actually benefit from it. Attacking inequality is like taking down a ladder while standing on it. And because of that, there seems to be no solution.

  2. just a comment, Hell. When money is printed, all kinds of irrationality happens. But in this case, it is not because the stocks, bitcoins, etc are overvalued, it is because cash is overvalued. At least that was the lesson I got from the book "When money dies". I suspect I got it off your blog...

    And to my knowledge, no empire has ever died with its currency undepreciated. In the fall of empire, from Rome to China, UK to Zimbabwe, the joke is on the guy holding cash.

    Dun worry about China... the wheels are already coming off. =)

    1. China’s leaders are clearly clamping down on excess in order to avoid a bigger bubble and its aftermath.
      Recent actions include the restrictions on listing Chinese IPOs abroad and foreign ownership of Macao’s gaming. In the case of Evergrande, they may be using it as a lesson to all domestic speculators: don’t do it, no one is too big to fail. In sum, they won’t allow a loss of their control on the economy.

      Furthermore, all of the above plus snubbing Biden during the recent phone call, points to increased determination to push hard towards their goal to be the next global Empire. I think Taiwan is next, particularly after the nuclear submarine deal between US, AUS and UK.

      It’s getting hotter out there…

    2. I feel the bubble is already so out of control there is no way to acknowledge it anymore. They are riding a tiger. And they know it... which as you say, will mean empire or burst... sighz.... remember, the highest art in war is to win without fighting...

      Taiwan? I dun believe the leadership cares anything about Taiwan... why should they? A Chinese never tells you what he really wants. The constant harping on Taiwan suggest they don't actually care =)

    3. conspiracy theory.

      You got me thinking Hell (you have a knack for that). What would I want if I was in charge... I would want the bubble to go away... How?... Well a bout of global hyper-inflation would help... How? Control the leaders... Won't the people suspect?.... No, we will make the leaders clearly patriotic and anti-china by beating the drums around Taiwan. They can respond in kind and give a show to their population...

      Would go down nicely as a new folklore yes? How we finally defeated the evil barbarians. =)

  3. article covering Hell's arguments