Juggling Dynamite

Good update from Wolf Ritcher this week.  Leverage and speculation drive boom and bust.

SoftBank was only a cog in the huge machinery. Here is a direct audio clip.

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.

The number of U.S. permanent job losses (inverted scale below in green) versus the S&P 500 price (in grey) since 1994, throws some cold water on S&P 500 bulls today.

And more broadly, so does this look at global equity prices as a ratio of sales for the companies in the basket (below since 1980), today near the 2000 bubble top.

And lastly, for all those who like to say that the stock market is not the economy and so stocks can hold up when the economy tanks, here we offer US Industrial production (in green) compared with the price of the S&P 500 index (in blue) since 1996. Yes, I know, ‘this time is different’.

As we covered in our client letter for August on Monday, central banks can pump money into financial intermediaries and buy some securities to increase cash in the system but they cannot force lending nor productive investment through the economy. This is why M2 Money Supply (movement and multiplier effect of capital through the economy) shown on the left since 1958 (courtesy of SoberLook) has continued to collapse.

As a result, asset bubbles and non-productive capital mount like alligator jaws waiting to slam down on prices and participants once more. Gary Shilling’s month-end letter for July (subscription) “Underfunded Entitlements” covers the math of the current financial pandemic in detail. He touched on some of the details, including M2, in his recent BNN interview below.

Gary Shilling, president of A. Gary Shilling and Company joins BNN Bloomberg to discuss his bearish outlook on the market and why he anticipates the recession to continue though out 2021. Here is a direct video link.