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I Have Some Bad News About the Economy


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2022 Oct 15, 5:36am   14,348 views  302 comments

by Patrick   ➕follow (61)   💰tip   ignore  

https://www.hennessysview.com/p/i-have-some-bad-news-about-the-economy?publication_id=572577&post_id=78488561&isFreemail=true


Accounts are widely out of balance

How bad, you might be asking yourself, will the economy get? We’re about to find out.




The orange line is US wealth. The blue line is US GDP. The gap is the amount of wealth American households and non-profits must surrender. You see, these two lines must move in lockstep. They do over time. When they get out of sync, something will put them back into sync.

The gap is debt.

Accounts must be settled. It’s called “a reckoning.” And the reckoning is here knocking on the door.

To put this gap into historical perspective, here’s an extended view of the same data with Dr. Hunt’s markups.




From 1951 to about 1997—the year the Monica Lewinsky story broke and Howe and Strauss published The Fourth Turning—the two lines moved in lockstep. Then Alan Greenspan decided to tinker, to grow wealth without growing GDP and without kicking off inflation. ...

What that gap represents is one of two things:

Money stolen from other people (other economies).

Money stolen from future generations of Americans.

How We Borrow from the Future
A few years ago, in the 1990s, we heard a lot of stories parents going to jail for identify theft perpetrated against their own children. About 1990, the government required babies to have a Social Security Number before they left the hospital. (I remember because it happened between our second and third children.)

Some shiftless parents soon realized they could apply for credit using their kids’ SSNs. They could default, and the creditor could do nothing. You can’t collect from a six-week-old infant.

This, of course, constituted credit fraud, so the parents who did this (and there were many) went to jail. (Not sure what happened to their kids who were left with no parents and lousy FICO score, but that’s not the point.)

The point is, all of us have been doing what those parents do only legally. The government allows us to run up our kids’ and grand kids’ debt as long as we do it with the government’s approved identity-theft programs.

So we did.

If you look at that chart, about 1/3 of our household and non-profit wealth is stolen from other generations or other countries. And we have to pay it back. Now. Or soon. ...

How We Borrow from the World
Some months ago, I wrote a series of posts about the US dollar (USD) as the world’s reserve currency and the petrodollar. (Here and here.) To summarize, almost all international debt is settled with USD regardless of the two local currencies involved. Britain settles its debts with Costa Rica in USD, etc. This includes the oil markets. Saudi Arabia, in turn, buys US treasuries (national debt) as a store of value for its copious oil profits. This allows the US run up massive debt knowing there’s always a market for our bonds.

Until there’s not.

Have you notice that Saudi Arbia is drifting out of the US orbit?

I wrote it about in those earlier posts, but the most certain sign of the Kingdom’s pending divorce with from Uncle Sam happened this week. Saudi Arabia disclosed that Joe Biden tried to strong-arm the Saudis into delaying OPEC+ oil production cuts until after the November elections. In diplomatic worlds, this was a slap in the face insult to the US and, particularly, to the Biden regime.

Rumors say Biden threatened to cut military sales to the Saudis if the OPEC+ cuts were announced before the elections. Not only did OPEC+ announce the cuts on its timetable, the Kingdom told the world about Biden’s threat (without disclosing the exact terms or names). Among “partners,” such public humiliation is a sign of pending breakup.

In return, the State Department and Joe Biden announced they would reevaluate the US’s strategic arrangements with Saudi Arabia after the election. That should be interesting.

What it means is that the US might not have as eager a buyer for debt as we’ve grown accustomed to. And that means the price of US treasuries will decline. Less demand means lower prices. When the price of bond goes down, the interest goes up. ...

I’m not saying the Saudis are about to stop taking our checks—I’m saying the for the first time since the Nixon administration, they’re acting like they might. Which means the are going to demand a bigger discount—the difference between the face value of the bond and sale price. That discount is the interest, and the bigger the discount, the less cash we have to spend tomorrow.

That’s one way to close that gap. You reduce the amount of cash you get in return for a future promise to pay. The amount you owe stays the same, but the amount you get now gets smaller.

How Our Kids Get Their Money Back
Remember the two ways we built that gap between wealth and GDP? That’s the first way. The holder of US treasuries want to cash their bonds, and they don’t want to buy new ones.

The gap begins to shrink, and that shrinking is mostly in household wealth.

The second way is intergenerational theft. So how do our kids and grandkids force their accounts settled?

Have you heard about the labor participation rate? Have you heard about the labor shortage?

An odd thing about the jobs numbers in recent months. While the number of “new jobs,” also known as “new hires,” has been strong, the number of people working has been going down, down, down. Why is that? ...

The kids aren’t taking our post-dated checks, either. They’re simply not participating in the US economy—at least, not in the official US economy. They siphoning of that excess household wealth NOW, in the present. They are not working in ways that grows the blue line (GDP). They’re shrinking the gap by lowering the orange line (wealth).

Wonder where inflation is coming from? We’re spending the excess household wealth without increasing the products and services available to buy with it. Inflation is how future generations close that gap. They spend your excess wealth without producing. And it’s happening right before our eyes. ...

In truth, we will only lose our ill-gotten gains.

While, we didn’t personally rob from the kids and foreigners, we were participants in a rigged game—a game that’s getting unrigged in a hurry. We enjoyed the spoils of the petrodollar and zero interest rates.

This account-settling process is called a reckoning, which sound harsh because it is.

https://www.epsilontheory.com/hollow-men-hollow-markets-hollow-world-2/

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67   AD   2024 Feb 19, 10:50pm  

Rin says

if the slope flats out before the Stochastic RSI gives a confirmation


The slope flats out means the MACD is steady or constant ?

and for how long ? which MACD ? 200 minus 50 ? do you use exponential moving average or simple moving average ?

RSI is helpful as far as 14 day trading period. Look at ticker "GOOGL" with a RSI(14) now around 30. Not sure if there is enough downside risk toward $135 this week. Seems more upside potential for GOOGL this week.

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68   WookieMan   2024 Feb 19, 11:38pm  

just_passing_through says

Probably. I have a great fuzz buster that has GPS (from 2007 no less; paid an extra $50 to get one with those rare BLUE LEDs; you should see my reef tank now) that I didn't buy for speeding. At one point in the SF bay area traffic cameras were popping up everywhere (deep in neighborhoods) and it had a database you can update to detect those, speed traps, bridges that have fallen out etc.,. I believe the cameras were outlawed. They certainly disappeared.

Driving wise, I know you said it wasn't for speeding, but I just drive like a geezer. I also know how stop lights at least are programmed from fiends and clients of my wife. I can see the light a quarter mile out (since I'm mostly rural) and know to let off the pedal or speed up timing wise. Also check your lights on your car. I check them once a week. That's what you'll get pulled over for 7 out of 10 times. Not speeding. Gotta be going 15-20 over for them to want to get out of the car and potentially get shot.

I'm lazy and don't do my own oil changes. When I arrive they ask me what services I want. Check my head lights, turn signals, brake light and license plate light. Then I say oil change. A $15 head light change is cheaper than a lot of driving outcomes I put myself in. We always get hotels at events. $150 versus $5k for a DUI? I consider it insurance.

Knocking on wood currently, I was last pulled over speeding when I was 18. My car was searched and I was groped by a female cop in a pat down. She somehow missed 20 beers in my back pack... Dry county on Sundays at my wife's college at the time. My backpack was literally the only thing in the car. One of my first anecdotal experiences where I realized most people suck at their job. That was an easy $150 more in revenue. And I agreed to be searched. Was sober. Kind of a crazy experience as basically a kid still. It was a mini van as well. She thought I was hauling drugs to a college town in Western IL.
69   Rin   2024 Feb 20, 7:41am  

AD says

and for how long ? which MACD ? 200 minus 50 ? do you use exponential moving average or simple moving average ?


I'm taking a much more simplistic approach to using the MCAD, all defaults (12,26,9) & EMAs, and you can tell easily where the price exhaustion points are for the QQQ. The caveat is that the price action stays above the 120 day EMA for the market to be bullish.


70   AD   2024 Feb 20, 7:55am  

Rin says

The caveat is that the price action stays above the 120 day EMA for the market to be bullish.


That happened around 23 October 2023 ?

Now the stock is well above the 120 day EMA, so is a false bottom now forming ?

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71   Rin   2024 Feb 20, 8:07am  

AD says

That happened around 23 October 2023 ?

Now the stock is well above the 120 day EMA, so is a false bottom now forming ?


Right now, the ADX is strong, the smoothed StochRSI is in oversold territory but hasn't reversed its slope (towards upward) so all it's looking good that this is a real "bottom" in formation in terms of another bounce. I want at least the StochRSI to slope upwards as its heading into 15% or the MCAD histogram's slope to flatten again.
72   AD   2024 Feb 20, 8:13am  

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Check out Googl. It dropped to a RSI (14 days) of around 30. Look at how much its been beaten down

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and very low ratios for put to call (volume today and open interest) for this Friday's contracts expiration

https://www.barchart.com/stocks/quotes/GOOGL/put-call-ratios

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look at the very high premiums such as $148 strike... 96% chance of expiring out of money yet an annualized gain of at least 14% ... the rule for me is that the % expiring out of the money added to the gain needs to equal at least 100%

if I am at risk of being in the money such as the stock is around $147 on Wednesday afternoon, then I am rolling it up by "buy to close" and then "sell to open" with a strike of at least $149 for the next week's Friday expiration.

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73   AD   2024 Feb 20, 9:43am  

Rin says

I want at least the StochRSI to slope upwards


you look for RSI clearing past a recent low by increasing at least 15% from that low ?

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74   Misc   2024 Feb 25, 5:01am  

So now California is projected to have a budget shortfall of $73 billion.

I personally don't know how accurate that forecast is because if a sizeable number of Nvidia employees cash out their stock options...well Newsom could even have a budget surplus to give even more free money to illegals.

Stock market gains don't directly tie into the CPI, but all that free money from Nvidia gains...well some of it will find its way into real estate (last count 32% of existing home sales were all cash)...the rest well it's a free money smorgasbord for all kinds of consumer spending.

We will have to see how the rest of the year pans out for stock market gains.

https://www.msn.com/en-us/money/markets/california-faces-deficit-difficulty-as-predictions-show-26-rise-to-73-billion/ss-BB1iQTSk?ocid=msedgdhp&pc=U531&cvid=f001f92aff72416eabc692f76d67b360&ei=26
75   fdhfoiehfeoi   2024 Feb 29, 11:37am  

That would be a net loss of nearly $100 billion. The budget was plus about $30 billion.
76   fdhfoiehfeoi   2024 Feb 29, 11:37am  

Another insider, the Waltons sold $4.5 billion worth of shares recently. If you're holding stock you should be getting very nervous...
77   AD   2024 Feb 29, 12:25pm  

NuttBoxer says


Another insider, the Waltons sold $4.5 billion worth of shares recently. If you're holding stock you should be getting very nervous...


Walmart stock has increased about 12% a year over the last 5 years, excluding reinvesting its +1.2% annual dividend.... a lot of this is driven by the pandemic spending and inflation was about 23% over last 5 years (compared to Walmart stock appreciating 77%)

They could be cashing out as part of a plan just like Bezos is cashing out his Amazon stock, and Bill Gates reducing his ownership of Microsoft going back ton the early 2000's.
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79   AD   2024 Feb 29, 1:59pm  

UkraineIsFucked says

Hey PatNet Fed Rate Cut Experts!

WTF ya gonna do now?


The only matter is that overall inflation or PCE is now at 2.4% for the last 12 months and likely the Fed will be politically pressured by the Democrats to cut the Fed Funds rate from 5.5% to 4.5% if annual PCE averages less than 2.75% for at least 6 consecutive months.

Again, go back to the recent interview of Jerome Powell by 60 Minutes when he said rate cuts are possible if inflation remains between 2 and 3%.

I see the Biden Admin doing whatever it can to make sure there is no spike in gasoline and diesel prices until after election day.

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80   AD   2024 Feb 29, 3:04pm  

.

Mish at Mish Talk and The Wolfman at Wolf Street have been covering rental cost. They both have been tracking median household income and its real or inflation adjusted increases when reporting about household costs and standard of living.

Right now for Bay County, FL, anecdotally the cost of living continues to be manageable for the average service worker making $15 an hour and renting a bedroom in a 3 bedroom townhome within 2 miles of the beach.

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81   fdhfoiehfeoi   2024 Mar 1, 7:08am  

AD says

They could be cashing out as part of a plan just like Bezos is cashing out his Amazon stock, and Bill Gates reducing his ownership of Microsoft going back ton the early 2000's.


You forgot Zuckerberg. And sure, it's all just normal mass selling that happens to be going in within the same window.

I think you know my opinion on that type of coincidence.
82   AD   2024 Mar 1, 9:38am  

NuttBoxer says


AD says

They could be cashing out as part of a plan just like Bezos is cashing out his Amazon stock, and Bill Gates reducing his ownership of Microsoft going back ton the early 2000's.

You forgot Zuckerberg. And sure, it's all just normal mass selling that happens to be going in within the same window.

I think you know my opinion on that type of coincidence.


Yes, as its a consensus among the top tiers of the investment world. It could be that there are investment bankers who are advising them, and those investment bankers collaborate with each other at the New York City squash courts, South Florida country clubs, etc.

I think its RIGGED somewhat. I look at these stories about Google AI's Gemini (formerly named Bard). I wonder if its part of keeping the price of GOOGL depressed by creating market panic or hysteria.

This benefits perhaps the boutique and politically-connected hedge funds who collude with industry insiders at GOOGL and the corrupt media.

For example, they adjust their trading based on this inside information such as buy GOOGL put option contracts on a weekly basis over the last 2 weeks.

Also, we don't have visibility of how much of GOOGL insiders and the company are exploiting this by buying back GOOGL stock at a "cheap" price.

Look at how Facebook stock was on a RIGGED or MANIPULATED roller coaster ride recently such as hitting a low of around $90.

Wonder if Cheryl Sandberg had any involvement with that. Give credit for Zuckerberg for promoting Facebook Reels (F.U. Chicom Tik Tok) and cutting back on Virtual Reality.
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83   GNL   2024 Mar 1, 9:41am  

I don't doubt for a moment that there is massive collusion in many areas of the political, social and financial American economies. And international economies.
84   AD   2024 Mar 1, 9:47am  

GNL says


I don't doubt for a moment that there is massive collusion in many areas of the political, social and financial American economies.


I believe in GOOGL as a stock. I know the company as I have been actively using its products such as Chromebook, Android Phone, Google Documents, Gmail, Youtube, etc.

Its just that selling weekly covered calls is very risky recently because of the media dropping GOOGL stories which cause extreme volatility in mid-week trading. It forces me to buy to close and then roll up to higher strike price for next week's expiration.

Not too long ago, the media dropped a AI story on Thursday that was positive about GOOGL and the price just spiked about 5% in one day when it was already up about 3% for the week. Now this year's AI stories are negative about GOOGL.

I've broken even over the last 2 months on weekly covered call premiums for GOOGL because of this. Last year I earned about 6% return for weekly covered calls with GOOGL.

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85   WookieMan   2024 Mar 1, 11:10am  

NuttBoxer says

You forgot Zuckerberg. And sure, it's all just normal mass selling that happens to be going in within the same window.

I think you know my opinion on that type of coincidence.

We'll never know. I don't make picks on stocks. CEO's and board members can have a shift in life and sell off stock. Sometimes you just want out of the stress, but want to do good by the stock holders and not do it all at once. Any one of us could retire nicely on $5M in the bank collecting $250k/yr at 5% WITHOUT losing a dime. They have that times 100 at minimum. Sometimes the game gets old. Unless you know the person, stock gambling is a suckers game. Never take insider selling with that much merit without other obvious issues.
86   fdhfoiehfeoi   2024 Mar 1, 12:56pm  

Like the shittiest economy in US history...
87   Rin   2024 Mar 1, 1:35pm  

AD says

Rin says

I want at least the StochRSI to slope upwards

you look for RSI clearing past a recent low by increasing at least 15% from that low ?




Take a look, it's already happened during the past week.
88   richwicks   2024 Mar 1, 2:14pm  

just_passing_through says

richwicks says


Why not?


Hopefully it's because a lot of people still value privacy and don't want to be tracked by the government.

I'd imagine those "a lot of people" are Gen-X or older IF that's even true.


No. Everything is recorded. I can't stress this enough.

The cost of recording the ENTIRE FUCKING YEAR of my anybody's life would be maybe $100 or $200 dollars. Everything is recorded. It's so cheap, I guarantee its done.
89   AD   2024 Mar 1, 4:20pm  

Rin says


AD says


Rin says

I want at least the StochRSI to slope upwards

you look for RSI clearing past a recent low by increasing at least 15% from that low ?




Take a look, it's already happened during the past week.



What is the bottom chart for QQQ with a value of 0.532 ? the "Stoch RSI" ?

I was going through this QQQ tech analysis: http://www.stockta.com/cgi-bin/analysis.pl?symb=QQQ&table=rsi&mode=table

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90   AD   2024 Mar 1, 4:32pm  

Rin says

Take a look, it's already happened during the past week.


Rin,

I noticed when GOOGL's RSI bottoms around 30 like last October it then rallies for at least 30 days.

http://www.stockta.com/cgi-bin/analysis.pl?symb=googl&table=rsi&mode=table

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91   Rin   2024 Mar 2, 12:28pm  

AD says


says

Take a look, it's already happened during the past week.

Rin,

I noticed when GOOGL's RSI bottoms around 30 like last October it then rallies for at least 30 days.

http://www.stockta.com/cgi-bin/analysis.pl?symb=googl&table=rsi&mode=table


I think you're confusing the basic RSI with the Stochastic RSI. The StochRSI normalizes the RSI between its min and max for that period and thus, you get more trading signals as it traverses between 0 and 100 just being nestled between 30 and 70 for much of the time. So thus, it's good for bullish markets but gets it wrong a lot when the market goes sideways or reverses.

Here's a chart w/ the StochRSI, 21 day period, for GOOG for the year ...



For the most part, when it broke out from below 15%, the equity rallied. And then, you can see the bullishness receding in 2024, when the StochRSI wasn't able to traverse its range.

I would even exit, if the StochRSI fails to traverses but instead, reverses slope in the middle. And thus, you can even make some of the sideway trades in 2023, more profitable.
93   AD   2024 Mar 8, 10:08am  

Yeah did Zuckerberg regularly sell stock like he did recently when Facebook was around $85 to $110 a share about a year ago ?

How rigged or manipulated was Facebook stock after Cheryl Sandberg left Facebook ? The media was on a blitz about how Tik Tok was going to replace Facebook.
94   AD   2024 Mar 8, 10:13am  

Rin says


I think you're confusing the basic RSI with the Stochastic RSI.


Yes Rin, I use the simple or basic version of RSI, just like MACD for me is 200 SMA minus 50 SMA. I also monitor put to call ratio for volume and open interest, and daily volume versus average volume. That's about it Mi$ter Rin.

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95   AD   2024 Mar 8, 10:28am  

I appreciate the recommendation and insight. I am going to read more about it and adopt it as far as selling covered calls for non-shit stocks like Amazon. This may be helpful when considering rolling down (to lower strike price) the covered call during intraweek trading when the stock has downside risk.

I appreciate it normalizes RSI.
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96   AD   2024 Mar 8, 12:09pm  

Googl hit its 200 day moving average a couple of days ago (around $130) and then rallied to $138.08 for today's high.

I see your StochRSI (21 days) chart for Googl and looks like its barely above 0 during this week and possibly we have more upside going into next week.

Yesterday I rolled up from strike $137 for Googl that expires today to a $144 strike for next Friday. I got worried Googl was going to pop and rally +3.5% on expiration day 8 March.

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97   AD   2024 Apr 6, 10:36pm  

.

Of the 303,000 new jobs created in March 2023, the biggest increases were in health care (72,000), the government (71,000), leisure and hospitality (49,000), and construction (39,000).

Almost 45% of the new jobs are in sectors driven by government spending such as Health and Human Services. MishTalk website has covered this before.

Wages up 4.1% for last 12 months (versus government-reported annual inflation of around 2.7%), and the forecast was 200,000 new jobs. Also the unemployment rate dropped by 0.1% to 3.8%.

https://www.foxbusiness.com/economy/us-jobs-report-march-2024

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99   HeadSet   2024 Apr 7, 7:17am  

gabbar says





I am a bit skeptical of these "high level executives" who cannot find jobs. It sounds like entitled individuals who only know how to kiss butt in their former place of employment. If one is so skilled, why not start your own business?
100   Rin   2024 Apr 7, 8:23am  

HeadSet says

If one is so skilled, why not start your own business?


Many execs don't know their heads from their asses. They only know how to push ppl around in big organizations and thus, they tend to follow their B-school cohorts, company to company. Once that network runs dry, they're just like any Joe out there.
101   AD   2024 Apr 7, 8:55am  

Rin says

They only know how to push ppl around in big organizations and thus, they tend to follow their B-school cohorts, company to company. Once that network runs dry, they're just like any Joe out there.


I have a friend that worked IT network management and use to work the C Level support jobs.

He said they acted like they were in high school at the C Level. I wonder if they are so fixated on EQ plus Machiavelli that there is not any part of their brain that functions as far as IQ related skills like troubleshooting, problem solving, creative design, etc.

And I wonder what we see at Boeing relates to that type of C Level culture or paradigm.

If that is true at the C Level that means the company or organization will unravel quickly if your workforce of worker bees such as front line managers are blue hairs and DEI morons.

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102   fdhfoiehfeoi   2024 Apr 8, 9:27pm  

HeadSet says

I am a bit skeptical of these "high level executives" who cannot find jobs. It sounds like entitled individuals who only know how to kiss butt in their former place of employment. If one is so skilled, why not start your own business?


I've lived in blue collar neighborhoods and watched them get squeezed for over 10 years. How do you think Trump got elected? We just interviewed two very qualified SDET's, and I don't think either one got selected. How do you think companies stay profitable when everything costs more, and everyone's spending less?
103   AD   2024 Apr 8, 10:07pm  

NuttBoxer says

How do you think companies stay profitable when everything costs more, and everyone's spending less?


They need just the right amount of an Asian and White male slave workforce to keep them financially solvent. All the bonuses and promotions from their hard work go to the blue hair and DEI hires.

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104   DOGEWontAmountToShit   2024 Apr 9, 7:20am  

AD says

White male slave workforce to keep them financially solvent. All the bonuses and promotions from their hard work go to the blue hair and DEI hires.


That describes Google.
105   fdhfoiehfeoi   2024 Apr 9, 9:43am  

I just heard I'll be getting a raise and bonus. Also, we recently had a DEI survey sent out(anonymous). I let loose. Time to stop coddling the losers.

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