A Market Crash AND High Inflation?

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Imagine for a moment that the price of all your investments – your stocks, your retirement portfolio, your house – suddenly drop in half this year. Now imagine that on top of that inflation suddenly picks up, making your cost of living skyrocket.

That would be pretty awful, right?

Well, this might not be just some theoretical thought exercise.

Highly respected financial researcher Jesse Felder warns us that these twin dangers of a market crash and higher inflation actually could indeed happen in the near future.

For many months now we’ve been sharing the mounting abundance of data points revealing that today’s markets are historically unprecedented levels of over-valuation. To our list, Jesse adds record margin debt levels, which have NEVER been higher compared to GDP than they are now:

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Margin debt is a measure of how speculative the investing environment is: the more margin debt outstanding, the more speculative the time. So we are now living in the most speculative moment EVER.

Like many of our recent past guest experts like Grant Williams, Jim Rogers, Steen Jakobsen and Jim Bianco, Jesse foresees high inflation as the biggest existential threat to markets and the economy going forward. That by itself would puncture the euphoria supporting today’s asset prices.

So, ugly as it is to contemplate, we may be dealing with declining markets and rising inflation as 2021 progresses.

Which is why now, more than ever, is the time to partner with a financial advisor who understands the nature of the risks and opportunities in play, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate:

Anyone interested in scheduling a free consultation and portfolio review with Mike Preston and John Llodra and their team at New Harbor Financial can do so by clicking here.

And if you’re one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical resilience preparations.

We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.

But if not, consider talking to the team at New Harbor. We’ve set up this ‘free consultation’ relationship with them to help folks exactly like you.

SCHEDULE YOUR FREE CONSULTATION

This is a companion discussion topic for the original entry at https://peakprosperity.com/a-market-crash-and-high-inflation/

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I think this financial/economic information is interesting… but always, in the back of my mind, is… what is the history of these predictions? They are always “may, could etc happen”. How often in the PAST have these financial ‘experts’ been accurate? Would really like to see a backward look…

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kenya is planning to adopt bitcoin as a reserve
https://kryptomoney.com/kenya-central-bank-proposes-to-adopt-bitcoin-to-stem-the-shillings-depreciation/

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You can easily tell by the size of their customer’s yachts.

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Bah…humbug!
If or when this reality is upon the world I will survive, I am prepared. Nothing more I need to do. I only need until September and all I planned for will be done. At the very least I’ll be dried in with the cabin and I’ll take it from there but, I expect everything to be done.
It will be what it is after that and we’ll just have to figure things out. I am so happy I bought that greenhouse last year as it will be growing food well into winter and that will be a treat.
Folks, I am not going to sit here in fear of what this podcast reminded all of us is possible in our future. Suffice it to say that if it does blow up you really need to do everything you can this year to get provisions, get away from the population centers and get a shot gun and plenty of shells. I’m dead serious. Learn to say yes officer and no officer. Then stay out of site.
I absolutely know what it is to be hungry, cold, out of work and without cash. None of these examples will see me struggling for at least a year and a half, if ever.
I wish you all well, and remember, the Rich have all our cash and they own everything so they now have nothing because none of them will have enough cash to fix what they just broke. I told you, Folks will go to their homes and demand a pound of flesh. So many people will just squat in the homes the Rich own which the crisis just took half of their equity during this coming crisis. Oh boy, I want to live through it all, I want to be a part of the new world and I hope I am blessed enough to be in that situation. Nothing surprised me in this podcast, we all know we live in an unsustainable world, it shouldn’t surprise anyone. I just hope you all have committed to this all these years and if you haven’t, well, shit Man is all I can say. Peace
PS: I do have two questions: how in hell will we get Inflation after everything has been destroyed in half and no one has any cash, a job and who will supply the Demand in anything when the food lines reach many millions of Good Folks? There’s holes in this Podcast that doesn’t make any sense to me at all. Cash will be King are my thoughts all along. Now, oil will not be well supplied as production of oil will be severely hampered by lack of capex. If so then oil will rise exponentially from here, over $4 bucks this summer is possible and that alone will dampen all the demand everyone is screaming about. Instead of buying things, you have too buy gasoline so, again, there’s a lot of reason’s to think it will be a big time battle between Inflation and Deflation. No one has a complete handle on this beast. Plus, we better save what oil we have to build out our infrastructure or we will be in trouble. Further, it might be time to sail the 7th fleet to just outside of Venezuela and use the Monroe Doctrine to stake claim on their oil that we will exclusively purchase and develop. We’ve softened them up pretty good with all our restrictions on their economy. Guess who dies first?! Yep, no brainer!. Respectfully Given
PS: Sandpuppy, you had asked for names in the oil space so I have some that will be no brainers. Buy: CLR, EOG, PIONEER Resource. and Occidental. That’s all you need. Trust me. Be healthy.

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Hey Folks, I want to share some (off the top of my head thoughts) stuff with you and it relates to the electrical and energy/environmental transition, and whether we can do it in the changing of our economy from internal combustion engines to all things electrical in our economy as a Nation…
Do we have the stuff to mine and bring to bear on our nation wide build out without much help from the world. I’ll try and be brief and everything is being thought out in real time as I have not sat and gave this a more focused effort.
So, what do we need? Copper for sure, oil is a must, heavy equipment so we need steel. We will need rare earth metals and cobalt, gypsum, platinum, palladium, the technology and we will need lots of calories in the form of food.
This project will require about 10 years I think to make a serious dent into our infrastructure. It will be a public/private enterprise with user fee’s to pay for the on going maintenance. The Government (us) will not need spend what you think, let the private sector grab the bull by the horn and use the government for issues like eminent domain. It will be required, no doubts about this.
Where on earth will we get all the metals needed for such a BIG project?
Lets start with the State of Minnesota. They have so much of everything we will need to build out the infrastructure from long burned out volcano’s. The first company in line to benefit will be Polymet mining. Their going through the permitting process and once underway they will have one of the largest world wide copper, gold, cobalt mines in the world. There are others too in cue just waiting to see what Polymet does with getting their permits. There are many world class mining operations lined up in Minnesota to supply the world and that must be good for our economy and our debt picture. The investment vehicles would of course be a long term play in PLM (Polymet) or back dooring it by purchasing Glencore. All total, Minnesota has the goods not just for us but to help in world wide supplies (exports). This is terrific news.
They, Minnesota, also have large deposits of iron ore still and frankly the deposit built America at the turn of the last century. Mining is up to the task for this most important build that we will have no issues doing this project. It will employ many great paying jobs.
Their located on the " Iron Range" and I had visited this area for a week in 2009 while doing my due diligence thinking ahead for what I knew was going to be faced. It’s a MONSTER PROJECT, very impressive and I got up close and friendly. What has shocked me is the pace, the environmental issues and 10 years later they are now getting underway. I have made no investments since I visited the site as I found out on the trip and being there that the environmental review would delay the project for years and it has. Now, I’m back researching and staying on top of things. I will take a nice position once Biden pulls together an infrastructure build and I cannot wait for this.
It’s important to understand that everyone will benefit from this project. That the spin off economy will set the stage for a robust economy for many years (decades) and will have a bi partisan effect on all politicians, States and individuals. It’s the kind of thing that can positively effect the whole nation. These jobs provide taxes and user fee’s that can bring us out of our debt crisis are my thoughts, at the very least it will help. Not well thought out yet as this is just a muse.
Additionally, we have been exposed by the Pandemic and must create a world class manufacturing industry for the production of drugs, pharmaceuticals and computer chips, with many other projects that must be done on the quick. We have no time to mess around here so make it state of the arts, robotic driven so that we can compete without using too much labor as it’s the highest cost to any business. We must get these things done as a mandate, get it done now.
Of note and as time moves forward, oil will be much higher and will make much China sends around the world very expensive so the cost will be much higher to export. So, if we build it closer to home then we can compete and we’ll use lots of the stuff ourselves. Oil is the economy so we must be smart about how we use it.
We have begun the expansion of rare earth metal mining on some mountain in California I think, and is impressive itself. It’s a huge national security issue and we must open up every mining site we can. I believe Las Vegas has a world class deposit so we now are not as dependent on China and that’s great news.
Oil is here we just have to drill it up. It may become very expensive too but we have to pay it because nothing has the BTU’s to replace oil. The hope is we can lesson the burden on expensive oil drilling over time by replacing gas cars with electrical. We’ll use everything. Solar, wind and most importantly we must have a commercial sized battery storage system that can handle the load, store what we make when the Sun don’t shine or when the wind doesn’t blow. We have enough oil and natural gas to bridge us from the old economy to the new and forget about replacing oil, that won’t happen, if we can lesson the burden on oil, keep the price in range so it doesn’t kill the economy then that would be ideal. That would work to all our advantages
In transportation it will take 2 decades at least to replace the internal combustion engine so oil is here to stay. We will build fast trains and route better transportation in the city’s to accommodate those who don’t want or need a car. We all get the picture.
The benefits are great. Low carbon output is a must must. We must have fast trains for long distance travel that run on a predictable schedule. We need lots of stuff frankly but we do have the stuff to complete all the projects necessary for your neck of the woods.
I view our future as NOT helpless. we just have to have leaders with clear incite and determination to get the job done without lining their pockets out of greed. So, I guess we need to get rid of about 90% of politicians on both sides of the house. I’d keep Romney though, he wasn’t much liked by me over the years but, I like his character, his integrity so perhaps I’m being naïve, after all he is a politician!
Not everything is dire and end of times thinking. We do still have destiny on our side. We must transition so lets get on with it. Most every job at this point requires human efforts so can’t really be touched by robots. This means a future for humans that will give us all the time to get ready for our future. Depend on AI because artificial intelligence thinks outside the box, can create quicker and faster routes to the same ends. A thinking brain of unbelievable speed and accuracy, can you imagine with the speed AI will have and unlimited information and data!!! I shutter at the possibilities AI will have in the future. It can only be a major benefit to the World going forward.
I wish everyone well and you don’t have to worry yourself sick wondering how we will get everything done. We can leave the foundation to a great future for our kids that they can use for their lives and that will be our legacy and an impressive one at that. Don’t ever give up and please desensitize yourself from words like DANGER or an IMPOSSIBLE TASK, we are DOOMED or things like that. They’re over kill as no one really knows the future. We always have hard decisions to make so this format is great for discussion and grass root movements. You have to move at some point, talk is just talk.
Adam has brought forth some very hard reports to give and he must. We can’t shoot the messenger but we should always respect the individual who is trying very hard to awaken us to so many obvious things that we will confront. It’s why I enjoy his work he provides on the weekend. It is often the stuff that hurts the most, the emotional issues that we all must face so I regard him very highly for his work, every bit as important as what Chris has to say. It’s a great partnership and without them both, this year would have been even more maddening. Peace BOB
PS: Adam, it is more my issue, my training that makes me say what I’m about to say so forgive me but, will you please adjust the star behind your back on the fireplace so that the edge of the star line up with one another. It’s about a half inch off from level across the bottom. It bugs the hell out of me and you would be kind to make that adjustment. Thank you BOB

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Many thanks Adam for another great interview. You do great work!

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#1. The powers that be control the markets almost completely. This means that after the 2008 crash, the entire system was rewired in such a way as to provide near total control over every aspect of the financial world. [ I use the words “near” and “almost” because total control of anything is impossible ].
#2. The powers that be have limited control over financial markets.
They have printed and pumped and bailed out every major company that was in trouble in order to keep the economy afloat. QE to infinity, blatant debt monetization, negative rates, they changed the way they calculated the CPI,GDP, and a host of other bedrock financial indicators. They sued and destroyed ratings companies that downgraded US credit. They eliminated the debt ceiling, disseminated narratives through manipulated media outlets to boost our outlook. Now, they are down to literally mailing us all checks to help keep food on the table.
Just when you think there’s no way they can kick that can another inch, they do it. So here we are with almost half of small businesses going under, record numbers of people filing for unemployment, and financial market highs blasted past the level of “too high” years ago and are at cartoonishly absurd levels. You want to say there’s no WAY this can continue…but dont be too sure!
We may have to consider the possibility that they literally CAN continue to manipulate markets higher and higher. I agree that at SOME POINT it has to end badly but as the old saying goes “Markets can remain irrational longer than you can remain solvent”…and I would add that highly manipulated markets can remain irrational even longer.
We are about to find out how much control they really have and I’ll tell you why; Joe Biden. Biden is the establishment choice. He was installed by the establishment through fake elections, backed by fake polls and fake media coverage. Even the debates were fake, rigged, bias and absurd. He couldnt get anyone to show up for his rallies and they resorted to fake crowd backgrounds in media coverage.
So now if the establishment allows the markets to collapse under Biden it will erode their power. They want the economy to thrive now that they are back in power. They are going to do everything under the sun to hold this economy up. My view is, if the economy collapses under Biden it means they didnt have total control. If they manage to keep this ridiculous monstrosity going for 4 years without collapse it means they have near total control of the entire system…I dont know which is worse but we’re going to find out relatively soon.

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Ha, that freudian slip early on was great. Allow me to venture a definition:
Excremental growth: Piling more bullshit on top of the existing bullshit, exponentially.
Man, this is a theme of our economy that Peak Prosperity should run with :slight_smile:
There’s probably a San Francisco/big tech poop-in-the-streets tie-in too!

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MGRS wrote: Excramental growth: Piling more bullshit on top of the existing bullshit, exponentially. Man, this is a theme of our economy that Peak Prosperity should run with ?
Perhaps we should add "Excremental Growth" as a fourth member to the Three Es??
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Exactly what I was thinking, Adam :slight_smile:
edit: also, I guess I should spell excremental correctly if I’m going to define it.

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From the “if the shoe fits” category. This is one of my favorite video clips that seems to fit a lot of scenarios. Financial expert, governor of a large sick state, average person out walking their dog. Watch your step, play your cards close to the chest, don’ take any wooden nickels or funny money. I’ve posted this previously, a classic IMO.
https://www.youtube.com/watch?v=rDXN7T3-Jrg

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Yes do something with the star, it always looks a little KKK to me.

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Way back in time, when I was in Engineering School, we had a saying,
“Well, your first degree is B.S. and we all know what that means.”
“Your next one is M.S.” That’s shorthand for “More of the Same.”
“And finally, there’s Ph.D.” which is a contraction of “Piled Higher and Deeper.”
So, all in all, I think “Excremental Growth” is very definitely a strong contender for our fourth “E.” Sure seems to fit the situation.
I hope the world survives all the madness that’s going on.
The optimistic side of me says that it probably will, but it’s by no means a sure thing. Thanks, Adam, for not editing out that Blooper. It was priceless.
Chuck

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Bob, thanks for your musings.  The ideas of building on what we already have and already know are really at the core of whatever one might define as Human Progress.

I wanted to make a couple of points myself, if I may.

First off, “Electrical Energy” is not the be-all and end-all. It depends on (a) how it’s made, and (b) what sorts of uses it’s put to.

In other words, Conservation of Energy and the Law of Entropy have to figure into one’s equation. One ignores them at one’s peril.

If what you’re trying to do is to warm your house, electricity is a pretty lousy way to do it. The simple reason is that the energy has to be first of all turned into electricity from some other source … be it wind, solar, combustion, nuclear energy, or any other source. The transformation of “non-electricity” into “electricity” is never a 100% efficient process. A lot of Heat is generated at the starting point just to make the electricity that finally winds up at the point of use.  In other words, it might take a Bonfire at the generator end, to produce a Campfire at the receiving end. If it were heat you were after, you would use a whole lot less wood if you just built your own campfire.

On the other end, (turning electricity into something else) there are efficiencies that depend very much on what that “something else” is.  If it’s Light that is to be the result, the conversion is less efficient than if it were Heat to be wanted. If it were Motion that was desired, it’s even less efficient yet. There is still room for discoveries in this domain, I have no doubt. I wish Nikola Tesla were in his prime now, instead of his time … but he’s not.

And, as the distance between electrical energy production and electricity consumption increases, there are inevitable losses along the way.

Since energy consumption is anything but constant, there is the need for buffering and storage facilities (such as batteries or other means of storing energy for later use). One can build a “peaker plant” that runs on natural gas, but you can’t build one that requires sunlight at night, or wind on a calm day, or water flow in a place without a river of sufficient size. And battery technology is not nearly as “green” as many people believe it is. Many resources get used up in the process of making them, and there are environmental concerns that rarely if ever get discussed.

One idea that’s coming to the fore lately is Distributed Energy Storage. In other words, you charge your home batteries slowly from the power grid, during off-peak hours, and then when peak hours come your batteries feed the Grid, selling back the power that you stored (or maybe even generated) for them. I think the idea has a great deal of merit, because Distributed anything is always more robust than Concentrated anything. Just because your neighbor’s battery is down doesn’t mean yours is … that kind of idea. In other words increase the resiliency of the system by spreading out the long list of things that can fail or go bad.

So the overall picture is not really quite as cut-and-dried as a lot of politicians and non-scientists seem to think it is. Nothing comes without cost, nor without considering efficiencies, nor without considering the depletion of finite resources, nor without considering damage to the environment, nor without understanding the impact on food supply, water supply and indeed overall quality of life.

As Chris has more than once pointed out, “It’s all connected.”
At least, I think people on this site readily acknowledge that the notion of
“Exponential Growth Forever” is just not going to be one of the options.

Maybe we can all be part of figuring it out.
I hope so.

All the best,

Chuck

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Huge inflationary pressures have been with us during 2020, and they are accelerating. Look at all commodities (note, gold/silver will be the last to explode…prices have been completely managed), US stocks, emerging markets, Asia-pacific markets, farmland, etc. All this will progress little by little, and then all at once. IMO, put a bulk of wealth in real tangible stuff, & invest a small position in a very leveraged fashion to take advantage of the perfectly sane (NOT crazy) behavior going on in the more & more extreme market behaviors. Wildly speculation should be completely expected in a crack-up boom. Not trying to benefit from that with a small portion of one’s wealth is unwise IMO.

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Can a market crash cause banks to become insolvent?
 

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Yes, a stock market crash can lead to bank insolvency, in lots of different ways. Though it depends which types of bank and which country.

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Chuck. thank you for all of this. Your end point is where I am at: I want to be a part of something like this and is why I hope I’m still around to participate or enjoy the utter genius of all the people who will figure it out. Elon Musk is going to be a part of the solution is my guess.
In building this home from the gtound up I am spending more time figuring out what is the best way to conserve the energy then build it into the Cabin leaving the room to correct and replace as better methods are brought online. Your example to store energy on off peak hours is awesome and viable. It will be part of our plan to discuss this method with all those in charge of supplying my power needs and back up systems. I expected to pay more for the Cabin than originally budgeted for and everyone I’m dealing with understands I want best systems, best practices with easy maintenance and retro fits. I’ll add your example for discussion before approving how we will move forward.
Thanks Chuck…BOB

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My favourite mental model of what a country undergoing a long-term semi-controlled collapse looks like is Argentina - with details of every day life provided by the archives on Ferfal’s blog: http://ferfal.blogspot.com/.
Up until the late 1920s Argentina was comparable on many economic parameters to Australia and Canada eg https://www.researchgate.net/publication/5052442_Economic_growth_in_Argentina_in_the_period_1900-30_some_evidence_from_stock_returns. Since then it has suffered a grinding descent into poverty for the masses, destruction of the middle class and a pretty crappy life for the elites as well. The interesting thing though is that despite various coups, high inflation, financial collapses, high crime, development of a permanently dispossessed lower class etc, it hasn’t (yet) accelerated into a fast collapse to a failed state.
It’s fascinating - the elites engage in enough wealth extraction that actual inflation probably runs around 40% per year and infrastructure is gradually being consumed through lack of maintenance. Systemic financial collapses seem to occur about once a decade and elections are heavily manipulated. Violent crime rates are horrendous in cites and rural areas, non-corporate farming is under significant pressure and rule of law mostly lacking. Accordingly, the middle class is in collapse and even the elites have a fairly stressful life (routine kidnappings, car jackings, home invasions, limited access to quality tertiary level health care, high stakes Byzantine politics etc).
Amongst the lower classes there are intermittent famines in rural areas, in cities severe inter-generational poverty, unemployment and political dispossession (except for their participation in rent-a-mobs for the elites) means that the slums are ruled by increasingly feudal gangs.
And yet … GDP is still increasing (though the stats are probably faked), big corporate businesses do ok due to their political connections, the country hasn’t descended into civil war, most people live in fairly normal houses not armed compounds, students go to universities, the latest smartphones are ubiquitous, people still go to restaurants and cafes, old ladies still go shopping by themselves.