Juggling Dynamite

The Cullen Commission, mandated to examine whether inaction or corruption enabled money laundering to take root in B.C. casinos and real estate,  is set to conclude final submissions on Tuesday.  As reported by investigative reporter and “Wilful Blindness” author, Sam Cooper, the evidence presented has been clear:  stopping the flow of dirty cash into casinos would reduce profits for the BC lottery corp and the provincial government, so it continued.  Pretty straightforward.  See BC government waited 9 years to heed recommendations to reject drug cash in casinos, inquiry hears:

“The gamblers were paying back the bags of suspected drug cash they used to buy casino chips with electronic fund transfers in China and Canada, according to a 2011 RCMP report, meaning that the “loan sharks” were not only profiting from interest on their criminal loans, but also successfully washing criminal money in international banks.

From at least 2009, many high officials in British Columbia were repeatedly warned of a massive escalation of “bulk cash” flooding into BC Lottery Corporation casinos that “undoubtedly has its origins in the drug trade,” according to the RCMP.

…in October 2015, after [BC gaming minister Mike] de Jong learned of the RCMP’s money-laundering investigation at the River Rock Casino, [his office] the enforcement branch directed the BC Lottery Corp. to not accept any cash in casinos unless the source of funds could be determined.

However, the [BC Lottery] corporation responded with a letter, saying: “You have directed that BCLC evaluate the source of wealth and source of funds prior to cash acceptance in all instances… Implementing a process that will require source of wealth and source of funds confirmation prior to any transaction will in all likelihood put much of the 77 percent of slot and table revenue that is cash based in jeopardy,” B.C. provincial lawyers submitted.

Danielle was a guest with Jim Goddard on Talk Digital Network talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.

One of the most historically informative capital risk readings, the S&P 500 Shiller price to earnings ratio (shown below since 1870), topped 38 this month, far beyond the 1929 market top, and second only to the fleeting 44 clocked at the top of the 2000 dot-bomb hysteria.

Prevailing incentives and policies are an incredible mess to behold, but there is nothing new in financial markets.  Speculative episodes are as old as time, and no asset bubbles have ever been corrected by going sideways.  While we can’t predict when bubbles will burst, thinking people can benefit from the question that matters most:  is this market cycle nearer to an end or a beginning?

Jesse Felder revisited this yesterday with a look at the timeless chart of investor sentiment:

Where are we in the market cycle? pic.twitter.com/sxfWNvTHvc

— Jesse Felder (@jessefelder) October 13, 2021

After reviewing recent sentiment indicators here, he comes to this:

“Perhaps more importantly, it also suggests we now find ourselves in the October 2000 stage of the market cycle and there are some important similarities between then and now to support this thesis. Back then, it was becoming increasingly clear that March of that year represented the blow-off in sentiment. Stocks managed to hold up for another five or six months before officially rolling over into the bear market that saw dozens and dozens of the most popular stocks in the market fall 90% or more”.

An 80%+ loss cycle followed both the 1929 and 2000 stock valuation peaks.  It’s important to consider how a loss cycle of that magnitude or even a run-of-the-mill -25 to -50% decline would impact our life savings and retirement plans. Proactive defence is the rational course.  Financial manias end with a bang, not a whimper.