Most elevated global assets prices ever in history–what’s your move?

Deutsche Bank strategists are out with a new report stating the obvious:  “We’re in a period of very elevated global asset prices – possibly the most elevated in aggregate through history” and there are “a number of areas of the global financial system that look at extreme levels.”

Unless one is in complete denial, and/or paid to keep selling risky, low yielding assets to others at every price–there is simply no denying the clear and present dangers at hand:

“This includes valuations in many asset classes, the incredibly unique size of central bank balance sheets, debt levels, multi-century all-time lows in interest rates and even the level of potentially game changing populist political support around the globe. If there is a crisis relatively soon (within the next 2-3 years), it would be hard to look at these variables and say that there was no way of spotting them.”

The test for every individual at the moment–whether in the financial management and advice business, a client of one, or a do-it-yourselfer–is given the facts before us, what is your response?

For most in the financial business, the answer is keep buying and holding and hope for the best. Very few ever take active steps to seek meaning capital defense, because first it requires proactive, independent thinking, and second it means having the courage to step out of rising markets and look dumb while you wait for lower prices to return, however long that takes.

Even the few who express a bearish view or talk about massive global risks, tend to keep their clients and followers fully invested in the most vulnerable securities as they tumble into bear markets (Seriously, check their performance in 2008 for some insight).  The business is set up to collect the highest fees and commissions on the most risky assets and funds, so reducing exposure means a pay cut, and who wants that?

Others have learned that trying to be defensive will get you fired when your ‘performance’ lags others on the upside, even though indiscriminately buying and tracking indices up, means you also track them down.  When prices finally do mean revert, clients are most likely to sell at the bottom, fire and look to sue you, their long-always leader.

We each pick our poison.  The truth is that investing in publicly traded securities is a devil’s bargain of sorts.  No one gets through a full market cycle without regret or periods of frustration.  But it’s not a race, it’s a contest of our own personal discipline.

In the end, it’s not what markets do, but what we do in response to each part of the cycle that defines our longer term financial success or failure.  Today more than ever in our lives, we should choose very carefully.  Also see:  Stock Market Bubbles in Perspective.

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Fed’s QT on deck: what’s the plan?

Nine long years of continual monetary injections and we have risk markets and their cheerleaders with a perspective-blurring addiction of unprecedented scope and scale.

This chart from Lance Roberts captures a relative glimpse of the length and size of the overshoot in the S&P 500 this up cycle (since 2009) as compared with the last two (1995-2000) and (2003-2007).  And it says a lot, since the last two up cycles were considered text book financial bubbles for all the ages.  Clearly, we have a new winner on our hands this time.

The same participants that were capsized in the last two correction cycles are finally back lovin’ the wave once more, and completely unprepared for what comes next.  But that’s the trouble with risk and leverage addictions, the longer they go on, the harder and farther they fall and typically just as the undisciplined masses have gone ‘all in’ once again.

This time, it’s not just stocks, or corporate bonds, or derivatives or real estate that’s precariously valued. It’s everything all at once, all over the world.  How awesome is that?  You do have to hand it to the expansionary monetary theorists today, they really do know how to pump up the destructive behavior in humans. Congrats indeed.

If only the party could last forever.  Alas, it never does.  Peter Boockvar reminds today that the times are changing at long last, and the monetary tightening phase (which triggered 10 of the last 13 recessions) is about to embark on a whole new experiment in ‘Quantitative Tightening’.  See Fed’s QT is about to start:

We’re finally here. About nine years after quantitative easing (QE) began, quantitative tightening (QT) is about to start. On Wednesday, after the Federal Open Market Committee releases its statement, Janet Yellen will follow with a press conference that she will do her best to make as boring as possible.

Every Fed member I suppose is praying for boring because of the epic bubbles that QE and seven years of zero interest rate policy (ZIRP) has created in just about everything. They want this to unfold as orderly and as quietly as possible. Wishful thinking I believe…

He offers the modified prose of Paul McCarney for a little humor…

“Yesterday, buying the dip was such an easy game to play. Now I need a place to hide away. Oh, I believe in yesterday.”

Unfortunately, rather than worrying about protecting the capital recovery gifts that have been bestowed during QE, most are now busy cashing out of any remaining safe deposits they may have left and doubling down on the assets that have gone up the most already.

After the third longest economic expansion and biggest global asset boom in world history, now would be a smart time for participants to ask themselves or their long-always broker or advisor:  hey, so, what’s the plan now?  You do have one right?

(Spoiler alert: the plan is to keep you holding and keep you buying the highest valued, riskiest assets until you lose your shirt and run screaming out of crashing markets once more).  One more round trip for the memoirs.

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New record: Electric bus goes 1,101 miles on a single charge

US-based electric bus manufacturer Proterra upgraded its 40-foot Catalyst E2, now called ‘Catalyst E2′, with a massive 660 kWh battery pack and brought it to the track at the Navistar Proving Grounds in New Carlisle, Indiana, to test it on September 4.

The trial beat the record for the most distance traveled on a single charge by an electric vehicle. The Proterra Catalyst E2 max traveled 1,101.2 miles before its battery pack was depleted. See:  All-electric bus travels record 1,100 on single charge.  Here is a direct video link.

Each month, new municipalities are seeing the light and switching to clean, silent, public transport with no air and noise pollution and a fraction of the parts and operating costs.  Nashville MTA talks about the upside in the below video.

Nashville Metropolitan Transit Authority operates nine Proterra battery-electric buses throughout its downtown core. Learn more about Music City’s transition to zero-tailpipe emission transit vehicles from key MTA and civic leadership. Here is a direct video link.

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AI enabling ‘infinite disruption’ around energy use

The speed of change and status quo disruption today is breathtaking thanks to evolving AI and exponentially rising computational powers.  Doing more with less is the new normal, and it’s changing everything we think we know.  See:  GE is working on a robot that can save $200 billion in power:

General Electric Co. is working on a way to use artificial intelligence in electricity grids, a technology that it expects will save $200 billion globally by improving efficiency.

“We’re also putting a lot into the machine learning side, a lot,” said Steven Martin, chief digital officer at GE’s energy connections business, at an interview at the Bloomberg New Energy Finance summit in London. “We have a lot of people working on this.”

The technology would optimize how electricity flows in and out of storage devices such as batteries and points of consumption, in real time. This is expected to significantly increase the efficiency of the grid and save consumers money.

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The taxpayers’ growing flood insurance problem

A reasonable cap on coverage for high risk properties is critical. There are no endless funds available to governments/taxpayers especially today with already record debt at every level.  Everyone must focus on mitigation and risk reduction first as well as increasing the onus on individuals for greater self-insurance as this prompts us to make more cost-effective allocation decisions about where and how we choose to make our buildings.

The government is facing billions of dollars in flood insurance claims following hurricanes Harvey and Irma, and residents that live in flood-prone homes are applying for government buyouts though the Federal Emergency Management Agency, also known as FEMA. So can the financially-troubled National Flood Insurance Program move fast enough to help residents before they accept federal funding to rebuild?

This video explains the steep challenges facing the NFIP, which was roughly $25 billion in debt before the costly back-to-back hurricanes.  Here is a direct video link.

You can also see the current rules around flood insurance in the US here.

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Extreme weather events highlighting our world upside down

Imagine massive terrorist events inflicting on going pain and loss and everyone just continually cleaning up the mess without anyone asking or talking about what we can do to stop the cycle.  And then putting some of the terrorist commanders in charge of our response plans.  That’s where we are at with today’s extreme weather event coverage and response.  Ours is a world upside down.  But it’s not so easy as just blaming corporations and governments.  The blame game won’t suffice.  From the ground up:  the onus is on all of us individually to adapt and lead the change we need to see.

Houston Mayor Sylvester Turner has tapped the former head of U.S. operations for oil giant Shell to lead Houston’s post-Hurricane Harvey recovery effort. Marvin Odum was the chair of Shell for eight years. He retired in 2016. Hurricane Harvey killed at least 82 people, flooded thousands of homes and destroyed billions of dollars of property. It also caused widespread environmental contamination, triggering a half-million-gallon gasoline spill and the release of up to 5 million pounds of pollutants into the air. For more, we speak with best-selling author and journalist Naomi Klein.  Here is a direct video link.

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