Juggling Dynamite

The consensus that was supremely confident and risk-oblivious when valuations were outrageous, is starting to become concerned and gradually terrified as prices re-couple down to economic reality.  This is the usual emotional swing that transpires each market cycle but particularly where record levels of debt and leverage were used, as was this time. This clip reflects the sense of horror spreading through the oil sector and its related financiers. Panic in the host’s voice is getting palpable.

Macro Risk Advisors Chief Energy Strategist Chris Kettenmann explains why oil will head to $20.  Here is a direct video link.

But here’s a broader question: while the masses are now focused on when the oil glut will clear, few are even mentioning the plunge in other key economic indicators.  If the oil story is all about its supply-specific imbalances, what’s going on with Doctors copper and aluminum then?  They seem to be confirming a broad demand downturn.

As mainstream financial firms and advisers urge everyone to hold and hope as prices plunge, the question each client should be asking them is, “For how long?  How long will it take to recover my losses?”

The secular bear that began in 2000 has already inflicted two 50% declines for broad stock markets, and the historic over-valuations reached on QE mania into 2014 have baked in the likelihood of a third similar decline this time.  It took 5-7 years before prices were able to recover the highs hit before the last two bear markets: that is, five to seven years in order to recover losses and accomplish zero gains.

So if central banks are already out of bullets coming into this third cyclical bear market, the question has to be, “How long will it take prices to recover my losses this time? Will I have to wait until I am 60? 70? 80?”  Does their plan seem wise given your life expectancy?

Another year, another repugnant ‘bank star’ convention in Davos, Switzerland full of all the same people who were saved by taxpayer bailouts in 2008 and have been undeservedly, grotesquely enriched from central bank liquidity injections ever since.  This morning’s interview with Blackstone chief Schartzman is classic of the prevailing sociopathic “let them in cake” mindset.

In an earlier segment of the conversation he predictably explains that he thinks the current market downturn is just a ‘correction’ and nothing to be too concerned about (even though most markets have already fallen more than 20% worldwide, double the 10% ‘correction’ category).  Nope as in 2000 and 2008, the party line with this crew remains, ‘stay long, stay calm, no need for anyone to sell any investment products to protect themselves from capital losses’. 

‘We need to keep your savings in harm’s way in order to keep raking in our fees’, is the subtext which none of the business media have the guts to call any of their ‘honorable’ guests out on.

Schartzman says the amount of anger in America today is remarkable and mystifying to him:  “how is that happening, why is that happening, what is the vein in Amercia that is being tapped into across parties that’s made people so unhappy?”

This obtuse elitism it precisely why revolutions repeat throughout human history in order to shake up the status quo.

Stephen Schwarzman, chief executive officer at Blackstone Group, talks with Bloomberg’s Erik Schatzker about the 2016 presidential race, Bernie Sanders, and Donald Trump.  Here is a direct video link.