Juggling Dynamite

As I discussed here in 2021: An excellent year for the unscrupulous, it is important to understand that there is no level of personal wealth at which those without scruples will stop capitalizing on positions of trust and gullible followers.

This is why it’s imperative that we set zero-tolerance policies, prosecute abusers, and disgorge any profits they have amassed by breaching their duty of care.  Moral suasion, ethical standards and laws are meaningless when corporate and individual offenders can retain profits from their actions.

The system is rotting from within because predatory, trust-abusing behaviours have been increasingly tolerated and normalized from corporations and corporate insiders, central bankers, judges, politicians, media, so-called ‘advisers,’ celebrities and social influencers down.  Pump and dump have replaced ethics as the dominant model in an “everybody does it” world, and the social costs keep mounting.

Cryptocurrencies conscripting politicians and celebrities to promote their Ponzi is just the latest iteration, see:  Kim Kardashian and Floyd Mayweather sued by investors over alleged crypto scam:

“EthereumMax has lost around 97% of its value since early June, leading some investors to label it as a “pump and dump” scheme where scammers attempt to boost the price of an asset through false or misleading statements. The accusation features in Huegerich’s lawsuit, which accuses Kardashian and Mayweather of “shilling” EthereumMax.

…social media influencers are routinely paid by scammers to help them pump and dump new tokens on the back of pure speculation.”

While crypto-coins have broadly dropped 30% plus in the last two months, shares of related companies have fared even worse.

Behind all the marketing spin about ‘robust growth’ and demand-driven inflation, the truth is this:  workers x productivity drive economic growth and real income.  These trends remain negative since 2019.

“The economy hasn’t added one single job from the 2019 high-water mark. Not one. All the jobs that we have seen gained is recovered jobs that were lost. We’re not yet producing new jobs,” says economist @NelaRichardson on the labor market. pic.twitter.com/VxHaA8IGpj

— Squawk Box (@SquawkCNBC) January 12, 2022

Good macro overview in this segment recorded on Jan 5…

David Rosenberg believes we will transition away from the current burst of inflation to renewed disinflation. In an interview with Alfonso Peccatiello, author of the Macro Compass newsletter, Rosenberg, president at Rosenberg Research & Associates, lays out his thesis for inflation going even lower than 2.5%. Rosenberg draws on historic parallels to World War II on the current state of inflation and points to price bubbles, housing bubbles, asset bubbles, and quantitative easing as the culprits for the problems we are facing today. He believes investors should own treasuries in the 2022 economy. Holding strong to his contrarian view, Peccatiello asks him what would change his mind about his disinflation thesis. Don’t miss this interview where Rosenberg and Peccatiello discuss the inflation/disinflation story, the aging demographic and debt problem, owning treasuries, and how to position your portfolio and the emerging markets that offer growth opportunities.

You can view it here on the Real Vision site.

Word to the wise, ‘defensive’ sectors are those that typically drop less than others during bear markets; but dropping less does not mean they won’t lose money.

As shown below, the total return of stocks versus treasury bonds since 2020 is some three standard deviations above the long-term mean since 1995.  No time for complacency!
Also, see After years of abstraction, things are getting real for markets:

“…the end of extreme abstraction does not augur well for those arriving last to the party.

As the market switches to other less abstract investment themes, the danger is that a vicious spiral develops. Not only would investors pivot to more “real” investments, but scrutiny intensifies on recent crowd favourites revealing that there was even less than meets the eye in many of them.

We saw both behaviours when the dotcom bubble burst and in the aftermath of the 2008 financial crisis. And therein lies a final overlooked aspect to the past year. If 2021 was the peak of yet another bubble in ungrounded possibility, it will represent the third for this generation of investors. It’s hard to imagine many will take being fooled a third time well.