Overdosing On Crazy Pills

cmartenson · July 27, 2019, 3:49am

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Sometimes an otherwise-forgettable movie will be lifted up out of obscurity by the internet and made into a useful meme.

In the movie Zoolander Will Ferrell’s character, ‘Jacobim Mugatu,’ screams the line “I feel like I’m taking crazy pills!” because it seems nobody else sees what he does.

I have that feeling nearly every day now. And it’s getting more frequent and intense.

To the point where, some days, it feels like I’m in danger of overdosing on crazy pills.

Crazy Pill #1

Financial bubbles happen. History is full of them. It's just that they're just not supposed to happen more than once a generation.

How can so many people have completely forgotten the painful lessons of not one, but two, recent bubbles?

The bursting of the DotCom bubble in 2000 was traumatic. “Eyeballs” were favored for a time over “earnings.” But then investors woke up to the fact that all of their rationalizations for the sky-high valuations of profitless companies were actually ridiculous.

Okay, fine. Lesson learned. Earnings are actually important.

But here we go, again, less than 20 years after the DotCom bubble (and only 10 years post-subprime bubble – both far less than a full generation later to allow the keepers of the memories a chance to die off) with exactly the same dynamic at play:

In the pre-financialization era that ended a few decades ago, a more normal mix would have been roughly 15% of IPOs with negative earnings. Today it’s nearly 80%.

Just as it was in 2000.

By way of example, let’s look at Uber and Lyft. Both companies aren’t just unprofitable, but wildly so. The more these companies make in revenue, the greater the accompanying losses:

(Source)

This is the very essence of a broken business model. It's no different – literally, exactly the same – as a circa-1999 DotCom losing gobs of money on a pie-in-the-sky business scheme that sounded great but didn’t actually work.

No matter to Lyft’s stock price, though, as the market (or ““market”” as I refer to it because it’s so deformed it needs double quote marks to signify that condition) now values this cash-burning furnace at $18.9 billion:

Lyft’s stock price just keeps going higher, no matter the losses. One can only imagine how much higher it will explode if Lyft manages to somehow turn in slightly-less-than-negative-as-last-time earnings next quarter.

What matters during an asset price bubble is not the rational, but the rationalizations. Uber and Lyft are “transforming transportation” and “reducing urban congestion” even though taxis already existed and there’s zero evidence of the latter.

Wolf Richter said it very well in a recent piece:

Anything goes: story stocks, momentum stocks, hyperventilation stocks, consensual hallucination stocks, and financial engineering stocks that generate mind-boggling share prices that give these companies incomprehensible market capitalizations, and the mere mention of “fundamentals” gets naysayers ridiculed and thrown out.
It’s like the whole market has gone nuts.

(Source)

The full quote that goes with the meme is “Doesn’t anyone notice this?!? I feel like I’m taking crazy pills!!”

How can people not notice what’s going on?

Crazy Pill #2

I keep reading articles where hapless financial journalists try earnestly to make sense of a world that is now senseless.

It must be terribly frustrating to see the impact the central bank bubble is having on distorting the markets, but your editors disallow you to point any of that out to your readers.

A recent WSJ article noted that investors poured money into bond funds at a record pace in the first half of 2019. It then went on to explain this as a sign that investors might be cautious about the economy.

Sure, that’s probably a fair conclusion during normal times. But not when crazy pills are being served buffet-style by the world’s central banks.

Instead, we have to note that the world now has a whopping $13.7 trillion in negative yielding bonds – meaning record high bond prices – and negative earning IPOs both existing simultaneously.

When investors are cautious, they move money out of stocks and into bonds. That’s what the journalist was grasping for, but that’s not what’s happening now. Money is flooding into both stocks and bonds. It’s concurrently a risk-on and a risk-off environment – which means its actually neither.

It’s a bubble.

A magnificently-deformed time of monetary excesses.

We’re currently witnessing a massive blow-off top that will end in something quite akin to the Dark Ages – a time of systemic breakdown when we’ll be lucky to preserve the pinnacles of our current technological achievements. But let’s save that idea for later.

To make the “Bubble!” claim more concrete, let me burrow in a bit. Switzerland’s government bond market will serve nicely as a case in point:

Swiss 50-yr yield falls below 0%, entire Swiss curve now negative
July 25, 2019

(Reuters) - Swiss 50-year borrowing costs fell below 0% on Thursday for first time since August 2016, meaning Switzerland’s entire government bond market now trades with negative yields.

The 50-year yield fell 2.6 basis points to minus 0.014%.

(Source)

Pick any Swiss bond of any maturity and you’ll have to pay the Swiss government for the luxury of lending it money.

In the case of the 50-year bond, you’d pay $1,000 today for the pleasure of having the Swiss government promise to pay you back $993 in the year 2069.

Heck, even if the bond was paying 0% vs. a negative amount, that would mean that your money has no value. You give an entity your money and they give you back exactly the same amount 50 years later.

But with negative interest rates, you’re getting even less than that back.

I could possibly make sense of that if we knew that the amount of circulating money was going to fall over time, so there were fewer claims against more ‘things’ over time. That is, deflation.

But we’re in the exact opposite world with global central banks easing like mad at the moment and promising even more. Rate cuts. And more QE. And making serious comments about maybe buying equities directly. Or maybe just print up money and distribute it via MMT. The central banks have promised in word and deed that they’ll do whatever it takes!

Against that backdrop, what can we make of the hundreds and thousands of individual “investors” that are actually buying the Swiss 50-year bond at a negative yield of -0.014%?

If they hold that bond to maturity, they’re going to get less money back than they put in AND the purchasing power of that money is going to be seriously diminished. What sane person would make that deal?

Again, doesn’t anybody notice this?

Crazy Pill #3

By far the largest crazy pill I am taking, a horse-sized one that feels larger than my throat, concerns the serious consequences with society’s addiction to perpetual economic growth.

Edward Abbey said it best:

That’s what we’ve got now.

There’s nothing wrong with growth per se. But if it becomes the mission instead of the strategy, then it’s cancerous and self-destructive.

Virtually nobody in power ever questions the “need” for economic growth. It’s a universally understood imperative, especially among the banking class.

Despite already having supremely frothy stock prices and negative bond yields that require mega-doses of crazy pills to even contemplate, the world’s central banks are desperately scrambling to justify easing more – to drive stock and bond prices to even frothier heights.

And for what exactly? What’s so urgent, right here and now, about getting even more growth?

In nature, seasons come and go. The sun rises and sets. But if it were up to the central banks, the sun would stay perched at its mid-summer noon apex forever. Think of the corn yields!

Maybe we can invent a pill that will banish sleep. Think of the extra productivity of the resulting 80-hour work week!

Meanwhile, casually scanning the headlines we notice multiplying ecological breakdowns like these:

Individually any one of these might be explained away as a fluke. But collectively? They clearly shout that something is terribly wrong with the natural world resulting from our current monomaniacal pursuit of growth.

The current trajectory of the environmental data is frightening. People either are aware of this, ignorant of it, or in denial about it. Anybody of my age (mid 50’s) who spent time outside as a kid, or has noticed the recent dearth of insects on the screen door on summer nights, can see with their own eyes how the natural world of insects and migratory birds has been collapsing.

Doesn’t anybody else notice this?

To me, it’s just a simple statement of fact to say that the economy is a subset of the natural world. No ecology = no economy. No oysters in the bay means no oyster fishery. No soil means no farming.

But the way things are currently configured, within every political and financial institution, along with their compliant media presstitutes, the one and only goal is more GDP growth.

Which means more throughput of ‘stuff’. Resources + energy = more stuff.

When times get tough and GDP starts looking like it might (gasp!) fall, the State freaks out and floods the world with more money and more credit to cattle-prod the economy back to ‘health’.

The implicit, if not explicit, assumption contained therein is that some sort of salvation, or broad social good, results from perpetual GDP growth.

That was coincidentally true during the 1700’s, 1800’s and most of the 1900’s. But it’s absolutely not true anymore in the 2000’s. The blind pursuit of growth is now diminishing society’s prospects, not enhancing them. But the keepers of power have not managed to adjust to this new reality.

At least not publicly. Though you should see the number of rich people and high-level government institutions that are preparing for massive disruptions by building world-class bug-out shelters and stocking up years of provisions.

You might consider doing the same. Just in case.

I certainly have.

Conclusion

Being at peace with today's status quo requires taking crazy pills. Lots and lots of them.

Such is the nature of late-stage bubbles.

It’s also the nature of civilizations that have run their narrative past the breaking point. Late-empire Romans needed crazy pills to believe in Emperor Caligula. So did the Aztecs when they embraced Cortez.

Towards the end, the leadership of a dwindling civilization isn’t the cause the decline, but reflective of it. Once the narrative thread no longer makes any sense, having defective leadership is a requirement. It’s something the culture demands in order to keep the perverted status quo going.

This is why I’m strictly apolitical. It matters not to me whether it would have been Trump or Clinton in the White House. Either/both would have been similarly defective leaders. We are badly off the rails at this point, and our political system reflects that.

Similarly, I’m agnostic about who heads the central banks around the world. Draghi was loathsome, but Lagarde won’t be any better. Powell certainly speaks more clearly than Greenspan, but he’s literally no different.

Today we have a small cabal of unelected officials, many without any real-world operating experience (such as starting and managing a productive business) setting the prices of not just money, but of every financial asset. And after they “serve the public” they then rotate into the exact same banks and financial firms that most benefited from their “service.”

How is any of that different from the way the Soviet Union set crop targets and prices? It’s not.

The bottom line is this: Nothing will change until the system breaks.

It’s a 100% guarantee that somewhere between here and 2069 interest rates will be either very far north of -0.014% and/or the Swiss franc (and other fiat currency) has become worthless.

It’s a further guarantee that more cities and, possibly entire countries, will run out of fresh water. Agricultural soils will become vastly less productive. And the world will be well past peak oil.

In Part 2: The Antidote To This Insanity, we provide direct steps you can take right now to persevere, and potentially prosper, through what’s ahead. And to be ‘part of the solution’ vs among those still contributing to the catastrophes our culture is creating.

It’s entirely possible that ecosystem collapse will render whole new swaths of the globe uninhabitable to humans.

But, by all means, buy as much Uber and Lyft stock as you want.

But if you do, be sure to chug down a handful of crazy pills first.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access).

This is a companion discussion topic for the original entry at https://peakprosperity.com/overdosing-on-crazy-pills/

gerryoz · July 26, 2019, 11:37pm

Excellent piece, Chris. Couldn’t agree more. You’re not taking crazy pills, you merely have 20-20 vision.
Catastrophic climate change will not be prevented. It’s already happened. I have stopped worrying about it with the help of an article in The Economist that discusses how we can apply a “discount rate” to the value of the future, depending on how much more important we deem the present to be. Read it.
I have one son, almost middle aged himself, and he is determined to have no offspring, so we really can ramp up the discount rate! 100% is where I’m setting it. Yes, we’ll take down some other species but Nature is fecund and in a billion years the place will be humming with life again.
If I had grandchildren, I’d be forced to see things differently. I was listening to a Radio Ecoshock podcast in which one person described buying a mango, itself transported long distances to the point of sale, then another chimed in about driving the mango home in an SUV, then putting the mango into a fridge, and how all this was pretty unsustainable. It struck me then that yes, it IS unsustainable, but it’s a very pleasant way of life, one to which we have all become accustomed, and the alternatives will be nasty. I live on 4 fertile acres and let me tell you, growing your own food is no picnic. One bad weather event and the crop is gone. If we stop transporting food over long distances, if we stop refrigeration, if we abandon vehicular transport, and so on, life will go back to a time when living was brutish, hard and very arduous.
It would be much, much easier for the whole of society to agree that we are living unsustainably, to agree to continue living in this very agreeable way until we — the current living generation — all die, but also to agree that people should simply stop breeding.
I see no great trauma in the loss of our species. We have already baked in 3-4°C of heating (last time CO2 was this high, seas were 20m higher, temps 3-4°C hotter, see links below, so it’s just a matter of time now), enough to make living on Earth quite horrible for our descendants, so let’s simply agree that to have to live in this much hotter world, and simultaneously to be forced to give up so much of what makes life tolerable and comfortable, is simply unacceptable, and decide that our collective time on the planet is over. If we have no children, our species’ end is not personally sad. Children would gradually become more and more rare, is all.
I have a feeling that this is going to happen, one way or another, with or without general agreement, no matter what. I and my son have made this decision already, and from casual discussions I’ve had online, several other people admitted that they too were following that plan, although more unconsciously. It’s simple logic in some ways. Food for thought.

gerryoz · July 26, 2019, 11:39pm

https://www.theguardian.com/science/2019/apr/03/south-pole-tree-fossils-indicate-impact-of-climate-change
https://thinkprogress.org/carbon-dioxide-levels-sea-antarctica-b435497e1266/

dutch-john-2 · July 27, 2019, 6:36am

Afbeeldingsresultaat voor you are not going crazy you're just waking up

mav · July 27, 2019, 8:15am

https://www.youtube.com/watch?v=a_ou5T7rNoA

rodster · July 27, 2019, 9:00am

There once was a time where you were considered a deadbeat if you paid with a credit card. Today you are considered a criminal or terrorist if you pay with cash.

rodster · July 27, 2019, 9:04am

p.s. Is there a way to edit a comment once it’s posted? I’m not seeing it after PP made the switch.

brushhog · July 27, 2019, 11:53am

The biggest crazy pill I see everyday is the media which is literally attempting to gaslight the public everyday right in front of my eyes. For anyone who watched the Mueller testimony it is very clear that Mueller gave the democrats nothing toward their goals of impeachment, he reiterated his finding that there was no collusion, and repeated that he made no determination about obstruction. However, the media is presenting a completely different picture of what actually happened! They are nakedly and openly lying everyday. We’ve been watching this for three long years. The blatant lies have ceased to even be shocking anymore.
What makes the crazy pill even less palatable, is the fact that people keep tuning in. They keep discussing whatever the media says as though it is coming from a legitimate source! No matter how many times they are caught lying, as in the case of the Covington kids or the shameful coverage of the Smollet hoax…they seem almost unaffected by their own incredibility.
We now live in a completely Orwellian society. The media, which functions as the information gathering unit for society, has completely malfunctioned. Whether it is economic information, political information, global affairs, scientific findings, etc its all now completely fake and it’s tether to real world events is becoming more and more tenuous. If society were an individual, the media being the information gathering “senses” of that person, that person would be hearing things that aren’t there, and seeing things that don’t exist. He would be, for all intents and purposes, a schizophrenic.

gerryoz · July 27, 2019, 12:05pm

Brushog said:

Whether it is economic information, political information, global affairs, scientific findings, etc its all now completely fake

No, science is not fake. That's exactly what Chris is saying, that science is being ignored, not that science is fake.

davefairtex · July 27, 2019, 1:02pm

Try this on for size.
Definitely the media has gone sideways. DNC media calls RNC media “State TV”, while DNC media plays the “Trump is Bad” song all day long. Which the viewers of DNC TV just love. (After all Trump Really Is Bad. Didn’t he collude with Russia to steal the 2016 election? That’s what I heard. They should just keep looking, they’ll find something if they try had enough.)
Knee-jerk opposition to Anything Trump Does (which must be bad, by definition) results in very odd things like left wing neocons, democrats abandoning the US working class in favor of free healthcare for migrants as well as open borders.
But why?
I blame Facebook, and the trick they learned in hooking people’s attention. Their technique: figure out what people like, and then provide that to them, 24/7. You give them their own echo chamber, and they just keep coming back. Mix that with dopamine shots (like! like! like!) and you own their brains.
But you can’t just provide boring old data. Turns out, the biggest hook comes from emotions. Strong emotions. So that’s either outrage, or something cute. Trump looking and saying something stupid. Mixed with cat videos. Cat videos and outrage. That’s Facebook’s business plan, with some dopamine (like! like!) tossed in there too.
So, to compete, State TV and DNC TV have to compete by doing exactly the same thing. So its self-reinforcing opinion 24/7, because it makes people happy to have their biases reinforced.
And if they didn’t do that, their audience would wander off to Facebook, where they’d get what they “need” 24/7.
Anyone notice how short TV segments have become? Watch Tucker Carlson. His guests are on for maybe 90 seconds. Its jarring to me - I’ve always had an abnormally long attention span - but perhaps to the current viewer, their attention span lasts maybe 60 seconds, so 90 might just be too long. (I’m guessing here - but there’s gotta be a reason, right? State TV isn’t stupid.)
My guess: media and content have all been warped to compete with Facebook, and its 24/7 outrage + 1 minute cat videos. Outrage. Cat video. Outrage. Cat video. Flick. Flick. Flick. When you have to compete with the buzzing phone (oh look, a NEW CAT VIDEO!) whatever media you provide must be excruciatingly interesting and reinforcing of personal bias, or else your audience flees…
Bzzzz. Oh look, a NEW CAT VIDEO!
TV changes, or it dies. Killed by Facebook.

cmartenson · July 27, 2019, 1:03pm

No, science is not fake. That’s exactly what Chris is saying, that science is being ignored, not that science is fake.

You can't be quite that declarative. Science is conducted by scientists who are people. People sometimes lie and sometimes they cut corners or cheat. Sometimes they have a severe conflict of interest. Sometimes there's money on the line. Other times they have a very honest but just as erroneous confirmation bias. I have these traps lurking in me, so do you. One does not become an intellectual saint with the conferring of a PhD. It's not an 'at the margins' sort of a thing either. Fully two-thirds of scientific findings cannot be replicated by peers. It's something of a crisis in the fields of science. Wiki has a page dedicated to the phenomenon. Here's what results when you google "percent science cannot be replicated" Yes, I think science is a far better method than gut feeling or religion for determining something, I just want to be sure we are all on the same page. It's anything but a straight line with captured territory on the left and soon-to-be-unraveled findings on the right. Sometimes science goes off in an entirely wrong direction for a very long time leading to one of my favorite quotes. Max Plank said that "science advances one funeral at at time." Okay, maybe a Twain or a Mencken gussied that up a bit. Here's the actual quote:

The German physicist Max Planck said “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

So, yes, sometimes science is fake. More often than we'd like. I find this to be especially true in the medical arena and I never simply accept what even my most trusted doctor has to say about something. I take it into consideration and then turn to Google and other opinions before choosing a course of action.

edwardelinski · July 27, 2019, 1:54pm

Having released 900 pages of corruption,filthy language,homophobic and mysogynistic rants,mocking those who suffered and died in Maria one million people took to the streets and mobilized.From the US govt,NY hedge funds,their own govt, they were robbed blind.They are just getting started.Wish them well…

cmartenson · July 27, 2019, 2:44pm

I blame Facebook, and the trick they learned in hooking people’s attention. Their technique: figure out what people like, and then provide that to them, 24/7. You give them their own echo chamber, and they just keep coming back. Mix that with dopamine shots (like! like! like!) and you own their brains.

Well, just for fun, here's what Twitter has decided are the top trends for me to engage with today. I've labelled them for easier categorization and identification:

*sigh*

davegillie · July 27, 2019, 3:03pm

I’ve argued against many “doomers” and arm chair economists for DECADES that growth for the sake of growth is not only not needed, but can be bad.
This is the first well worded article I’ve ever seen spelling out why.
Normally all I ever get is attacked for daring to say such a thing (or even ask the question)!
again, THANK YOU!

uncletommy · July 27, 2019, 9:01pm

Sixty pounds off of 20 frames of comb. 60 frames left to extract. Things don’t seem so crazy when Providence abounds.

wfoordbigpond-net-au · July 27, 2019, 9:15pm

you watch the planets by brian cox and you look at what happened to venus and to me it looks like we are experiencing runaway climate change. a global emergency is occuring. its not just humans risking extinction. its all of life on earth. we need to:
measure gdp differently eg/
redefine gdp . eg:
Earth sustained index: esi = constant X (1/(%reduction in co2 emmissions))((1/population decrement))(forest regrowth-forest cut down)hard money transactions(caring for frail and elderly)( electric vehiclehydrogen vechicle/petrol vechicle use)
go nuclear
go to hard money (then the 1860 trillion dollar/year fx markets and all the resources they consume would vanish)
go to electric cars
nuclear shipping

pipyman · July 27, 2019, 9:41pm

science isn’t fake, some “science” is fake. Finding your way to truth is the challenge of our time. Accepting everything coming from the scientific community as “truth” as if it’s a synonym for “science” seems like a really bad idea to me. Everything must go through ones “”BS” detector before anywhere else. Always a good idea to see who funded the “science” too; funny how infrequently the findings don’t challenge the sponsor’s narrative and interests.

wfoordbigpond-net-au · July 27, 2019, 9:50pm

you watch “the planets” by brian cox and you look at what happened to venus and to me it looks like we are experiencing runaway climate change. a global emergency is occurring now. its not just humans risking extinction. its all of life on earth. i reckon it could all happen quickly. we are seeing weather conditions hostile to life now.we need to:
measure gdp differently eg/
redefine gdp . eg:
Earth sustained index: esi = constant X (1/(%reduction in co2 emmissions))((1/population decrement))(forest regrowth-forest cut down)hard money transactions(caring for frail and elderly)( electric vehiclehydrogen vechicle/petrol vechicle use)
go nuclear
go to hard money (then the 1860 trillion dollar/year fx markets and all the resources they consume would vanish)- make everyone read “the bitcoin standard” by saifedean ammous
go to electric cars
nuclear shipping
in my country: stop immigration (Australia)
stop having babies (or a 1 child policy)
we need to propagate a simple message and keep repeating it. here’s what I often write in the comments on zerohedge,

“All roads lead back to the fiat money system:
Broken countries. Broken trade. Broken bond markets. Broken manufacturing. Broken businesses. Broken housing markets. Broken Labour markets. Broken people. Mal-investments. Wealth inequality. Big Government. Mass immigration. Wars. Even climate change.
End the FED. End the ECB. End the BOJ. End the PBOC. End the BOE. End the SNB. End the RBA
Bring back The Classical Gold Standard.”

I believe profoundly that the deepest sickness of our modern society is the money system, which shortens our time horizons and reduces our long term planning. There are so many voices out there clamoring to be heard, but with nothing to say, who are in fact malinvestments themselves created by the fiat money system. but because these people are clueless about the changes that have to be made, they are fearful of any change. if only they knew that the economy would adjust the fastest under a hard money standard

wfoordbigpond-net-au · July 27, 2019, 10:22pm

ps: the fx markets turned over 1860 trillion in 2016. global gdp that year was 75 trillion (fx 25X global gdp). with a hard money standard fx markets would go to virtually zero. we have this huge monster market (fx) that is sucking the life out of the world, that is a by product of the fiat money system. once again, all roads lead back to the fiat money system… (from “the bitcoin standard”, by saifedean ammous)

brushhog · July 27, 2019, 11:29pm

“No, science is not fake. That’s exactly what Chris is saying, that science is being ignored, not that science is fake.”
Alot of what is masquerading as science is indeed fake. It is politicized, censored, and packaged to produce a response. Its become as much a tool for manipulation as the fed and fake news.