When The Market Unravels There Will Be "No Place To Hide"

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Few people alive understand how Capitol Hill and Wall Street work better than former Congressman and financier David Stockman.

And he is deeply concerned that our current political, monetary and fiscal policies are setting the stage for an epic breakdown in the economy as well as the financial markets.

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Risk is being grossly mispriced right now. Asset prices are being distorted into ridiculously dangerous territory by investors caught up in a flood of cheap liquidy as well as a widespread speculative mania.

Of the blizzard of warning signals that reflect this, here’s a gem – never before have so many money-losing companies been valued so richly:

<img class=“size-medium aligncenter” src=“https://peakprosperity.com/wp-content/uploads/2021/09/loss-making-market-cap.jpg” alt="“Total market cap of loss making companies” width=“500” height=“343” />

This, plus the gargantuan increase in deficit spending (along with its associated trillions in new debt), leads Stockman to warn that none of this is sustainable. And the farther the debt-binge and hot speculation continues before correcting, the more painful and permanent the reckoning will be

Which is why David agrees that now, more than ever, is the time to partner with a financial advisor who understands the nature of the market risks in play as well as the opportunities, 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.

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This is a companion discussion topic for the original entry at https://peakprosperity.com/when-the-market-unravels-there-will-be-no-place-to-hide/

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I noticed that, when asked ‘how will the central bank’s bluff be called’ David does not really have an answer. Only that ‘I cant believe that it can just go on forever’. I tend to agree with David and Ive been waiting for the shoe to drop for a very long time. But if you ask “why can’t the banks just keep printing forever?”…nobody can really answer that.
What is the limit? There really isnt a hard limit. Being that so much of the economy is completely captured and manipulated it can, theoretically, go on forever. We might be asking these same questions and predicting the same outcomes 10-20-30 years from now.

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Brushhog,
It certainly seems like the ability to print money out of thin air should have already ended. But in looking back at Roman history, the debasement of the currency went on for decades. I suppose our current spree could as well but it also depends upon the other critical factors such as energy depletion, environmental impacts, (esp. ocean acidification and plasticifcation imho) and the sacrifice of human activity into the politics of endless wars cleverly disguised as protecting freedom of democracy.
I think the key to answer the ‘how much longer’ question must revert back to the good old mathematical model of exponential growth. While we cannot pick a day, observation and some quick calculations say that it is very close.
I know, that has been parroted many times in the past. We have had the energy crisis before and our solution has been to print and pump. It worked and now we are in decline … again. Can we do it again? Maybe.
We have had stock market crashes before. Can it happen again. Probably.
We have had inflation before. Can it happen again? Yep. What about resource shortages and or food production shortages? We have had those in specific products at various times including huge impacts to agriculture during the dust bowl years.
Have we ever had to face these issues all at once? I would say that it has not happened for a long time. Perhaps the Romans came close. With energy supply chain problems (the wood hauling ships bringing firewood from England), endless wars on multiple fronts, currency debasement and politics to favor the upper class to name a few. That was insurmountable but it was not a worldwide problem and so it mainly affected Rome. Even then, it took many decades if not a century to play out.
I think it will progress much faster this time but I have been thinking that for a decade so what do I know?! Only that change is inevitable and it always happens the fastest when you least expect it.
Coop

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“…breakdown in the economy as well as the financial markets.” Ya think?
For all those who have been paying attention the economy and financial markets broke a long time ago. The question should be “How long can the economy and financial markets remain broken?”
Several times it has looked like the jig was up then something comes along and distracts everyone from collapse, then everyone starts talking about the “recovery” that is bound to happen. This can go on for a lot longer.
What can’t go on and what would be the final trigger is when the US dollar is no longer the world reserve currency. One would do well to read Michael Hudson to better understand how this started, how it works, How it gave the US “the greatest free lunch in the history of man”, and even how it could end. There are multiple factions coming together globally that will absolutely change that dynamic sooner than later. The problem with that is that would completely catastrophic for America so TPTB simply can not let it happen. They will let nukes fly before they let that happen on their watch.
So the best investment advice…and I am giving this out for free… pay attention to the next “destraction” and be ready to put your money in the right place. For 911 it was shorting airlines, insurance, etc. For Covid-19 it was Amazon, Big Pharma, Tech. Be ready to jump when they roll out the next one.

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“Destraction” - Thanks for that, Netlej. Much wider applicability than the current plandemic/scamdemic

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How can we invest to benefit from a potential global internet collapse?
I’m buying tools for survival with my dry powder, but let’s say I’m interested in pissing some cash into the wind on a gamble: what investments stand to benefit from the 21st century and it’s technological dependents collapsing hard?
Are there any neo-Luddist business opportunities that would succeed like Bubba-Gump Shrimp after a hurricane?

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The Internet was designed to withstand a nuclear war. You really think current events are going to bring the whole thing down?
The only thing I can foresee that would do it would be a worldwide blackout.
 

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Not sure I see a world wide internet collapse but rolling power outages, continued censorship, and supply shortages might render it all but useless.
I mean, if you cant say what you want to say on it, you cant buy things on it, and the power is unreliable…people are going to look for other ways. I expect, in the future, I will not be using the internet. Its already down to about 50% of it’s former utility. On a cost/benefit analysis its still worth it because I can still express myself in a few isolated pockets without being censored, and products [ like the used front end knuckle I just bought for my tractor ] are still easily available.
If that were to change…lets say this place and a few others werent here for me to read and comment, or supply shortage/power outages made sourcing goods difficult…I’d pull the plug [ and I’d get alot of satisfaction in doing it ].

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From a financial standpoint, I agree with the standard New Harbor/Wealthion analysis that all the indicators point to a bear market/market collapse, maybe 50-67%. However they themselves say that we have never seen this amount of intervention (by injection of liquidity, artificially low interest rates, monetizing of debt, etc.) in the markets and there might be even more to come. Therefore I can’t afford to be entirely out of the markets because the Fed could go to yield curve control, markets continue to go higher, very high (but not hyper) inflation could continue (similar to Argentina) where the markets don’t go down. I don’t have debt but I consider my 30% market exposure as a hedge just like I do my precious metal holdings. Everything has become so financialized and correlated that I expect that if the market crashes gold will do so also. Investors will sell gold to cover margin. There is also the distinct possibility that the Fed will do the same as they did with Covid and inject massive amounts of liquidity into the system and pump it right back up again. They Fed could also directly (or through some type of controlled entity) buy ETFs or other stocks (just like Japan does). So I am not in the stock market due to FOMO, it is more “fear of this craziness continuing for a long time due to things being different (unlimited Fed intervention) this time”. The worst that happens is that 30% of my liquid assets becomes 10%.
Regarding @Steve Kelso comment, I don’t foresee a sustained global internet collapse without some type of societal collapse. Then your immediate needs will become paramount (water, food, shelter, clothing, safety). The internet is vulnerable but any sustained attack would be considered an act of war and then we would be in a war which would involve at least some type of societal collapse as I mentioned above.
I am not sure where @Shplad got his information that the internet is designed to survive a nuclear war. The internet is very vulnerable to hacking, electromagnetic, and physical attack. I read an article in Bloomberg on how much of the fiber optics for the internet of Europe, Asia, Africa, and the Middle East goes through Egypt and the Sinai. Google is laying some underwater cables to try to avoid this choke point. I wouldn’t depend on the internet when times get tough.

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David always stimulates my thinking.
Here he’s articulated for us the reasons we Boomers, economic traditionalists that we are, don’t think current government economics is either sensible, moral, or long-term viable. But that begs some questions: what if the decision makers are not trying to re-establish the viable, independent market we assume must be recovered?
What if the powers have made the decision that limping from one stimulus to the next is acceptable? And that a coordinated global – or at least First World – debasement of currencies is the best or necessary path forward?
What if the internationally coordinated elite have determined that centrally planning the world’s economy, and therefore the numbers and life quality of the hoi polloi, is the only way to keep the global economy from collapsing? And that maintaining their power as long as possible is what matters most?
Adam’s right to suggest – as he did in a question – that the economic bluff they’re peddling does not get called if the central banks are all working in tandem to keep feeding sugar to the diabetic patient. After all, who’s going to object? Ordinary people?
It’s no longer clear to me that most people in the First World look beyond their own dinner plates. And we’ve already shown the ruling class that we’re willing to be locked down and shut down as long as the bread comes and the digital circus keeps playing. Increasingly, we accept martial attitudes and approaches from law enforcement personnel who are, themselves, convinced that they’re saving lives by breaking principles of democracy and individual rights. (Their behavior is just a variation on George W. Bush’s dictum that sometimes you have to violate capitalism’s principles to save it. Of course it’s not true, but it’s an easy lie to tell oneself, especially if one wants to believe it’s just a temporary violation; a necessary evil for the greater good. I think a good many front line health officials and local cops, even local elected and bureaucratic officials, think just that.)
David was likely right when he said that it only ends when the Fed makes a mistake from which it can’t recover. I’d just expand the idea to say: it ends when the international bank cartel makes a fatal mistake it can’t borrow from Peter to use to fix Paul. That’s bound to happen, as David observed; but I don’t think it’s bound to happen soon.
As for the potential for war, I wouldn’t rule it out. Thucydides trap and all that. We keep glaring at Russia, but China’s the proper focus. And it’s not clear to me that the US and West would win a hot war with her, let alone a commercial or cyber.

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Hey DF, if you see this and are willing, can you provide a S&P500 /Gold Ratio chart with a 200 day EMA?
My interest comes from this blurb on Sentimentrader.com:

WHEN TO OWN GOLD Jay looked at a simple long-term trend-following system to show when it has paid to own gold versus stocks. These days, there is chatter about the impending huge rally in gold (and other related stocks and precious metals). With the expansion of U.S. government spending and the national debt in the last 12 months, the talk of inevitable hyperinflation flows pretty freely. And maybe it will, in fact, all play out that way - with gold, silver, and mining stocks all experiencing explosive rallies. But gold has some proving to do first. Specifically, the ratio of the yellow metal to the S&P 500 needs to cross above its 200-day exponential moving average (EMA). The table below shows the cumulative performance for gold based solely on whether the gold/S&P ratio is above or below its 200-week EMA from January 1975 through April 2021. Does this mean that gold cannot and/or will not rally anytime soon? Not at all. It simply means that some improvement in the relationship between the performance of gold and the performance of the S&P 500 Index must occur BEFORE this particular indicator once again favors gold. This reversal of fortune could happen quickly if gold were to pop and/or if stocks were to swoon.
I'd like to know how far the ratio is from it's 200 EMA. Many thanks.
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Maybe The Collapse won’t happen until The Herd’s mentality pivots from “This is fine!” to “OMG! The sky is falling!”
We’ve seen a lot of events occur that could’ve/should’ve ignited the conflagration we’re all expecting, but the one crucial thing that hasn’t happened is the public’s psychology switching from routine to cataclysmic. I’ve noticed in my own circle more and more “normal” people becoming alarmed so maybe we’ll gradually get to a tipping point while cans are being kicked by our owners. OTOH I’m also watching for an event or string of events that suddenly stimulates large numbers of people into a panicked stampede. It could be anything so I don’t try to guess. Just watching and waiting, convinced that the psychology of The Herd is the key.
If enough people decided they didn’t trust the dollar anymore and started exchanging it for hard assets and spending it as fast as they get it, the economy and The Fed couldn’t withstand the tsunami. However, I doubt The Herd will come to this kind of conclusion like we did through thoughtful consideration of history, facts and trends. I’m convinced it will happen suddenly as a result of a panicked emotional reaction to some kind of news or events they perceive, plus the panicked emotional reactions of people around them in every day life.

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I think you are absolutely right THC, which is why tptb put so much energy and resources into false narratives to control the herd. I also believe that at some point they will lose control and the herd will stampede. I think all the lies we’ve all just been subjected to over the past 4-5 years must have weakened their credibility…then I’ll see a guy out mowing his lawn with a mask on and my faith in the public takes a nose dive.

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Gold vs the net ratio (SPX/GC - EMA(week(SPX/GC),200)).
Supposedly net ratio < 0 is positive.

Re: internet & nuclear war. If you go back in history, we had analog phone lines, and the concern for the national defense teams was pretty simple: how can we make sure to get the “go” code to the missile silos in the event of a nuclear attack.
A packet-switched network (where the network could “route around” outages in a given segment) was definitely more survivable than, say, a fixed set of hops on phone lines from Washington to the missile silos in South Dakota. ARPAnet was the solution.
Anyone else here remember ARPAnet?
Long story short: sending the go-code through to the silos during a possible nuclear war is why we got the Internet.

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I mowed my lawn before the worst of the pollen came down, but if I hadn’t, it would have been one of the few times I would consider a mask a good idea…
But I hear ya!!

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There’s a difference between something bringing the internet down and it being brought down.

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I don’t think that is the point (i.e. since Arapnet is better than a direct analog phone line it is nuclear attack means that it is nuclear hardened). Getting a few packets for a launch through doesn’t mean that everyone will still be streaming Netflix (or buying/selling Bitcoin). They use ELF to communicate with nuclear submarines at 76 Hz so the amount of data necessary for a launch is minimal.
Arpanet was decommissioned in 1990. It isn’t nuclear hardened. It just can survive partial destruction and still route its messages. Partial destruction of the civilian internet will just cause tremendous slowdown until the high bandwith users are shut down. I wouldn’t place my faith in the internet during a concerted hacking attack let alone a nuclear attack. The military may have their own systems of communication but if they are using the commercial internet to send launch codes then we need major help.

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yea, mon, Lawns. There’s some history there–about 'mericans imitating European aristocrats. [giggles]
My Korean made masks don’t say anything about viruses just pollution and particulate protection.

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Don’t worry, the new rabbit is about to be pulled out. SDR is it’s name. “Meep, meep!”

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So, if you are Microsoft or AWS or Vanguard, you can have twelve 9’s if you want for uptime (99.9999999999%) and fully replicated data with hundreds of miles of redundant dark and active lit up fiber interconnecting it all, but this is expensive.
I’m certain all the banks and wall street firms have this, plus triple or quadruple colocation and constant server replication over privately owned circuits. Military should as well. But that may be it.
I’ve designed parts of many small/medium sized data centers and worked in some pretty large ones too on rented rack space. These networks/servers contained in said data centers are only as resilient as the money put into them.
And believe you me, EVERYONE skimps on their resiliency in data design and networks because of simple economics of IT budgets and laws of diminishing returns. I’m talking DOD, retail banks, schools, municipalities, manufacturing, police forces, jails, online retailers, very large corporations (think of all the credit card breaches at Target and Home Depot).
I’ve worked with all of the above except Home Depot. They all have multiple “100 year flood” weak links. 100 year floods do happen though and they are never 100 years apart.
Other weak links are the average customers’ physical connections to the internet and the networking that routes/switches you around your ISP and the wireless carriers.
The ISPs are sometimes hobbled together from a variety of smaller networks that may or may not have had their backbone devices replenished in the last decade. Or they could be run over 20 year old coaxial cable.
Cellular data in particular is designed with limits in the number of connections that each cell can cover, and there isn’t much overhead in certain population dense areas. Physics can only work within the constraints of nature and FCC bandwidth allocations.
The last and most important thing to consider is electricity.
The internet is a MASSIVE consumer of electricity. Powered by electricity which heats up the space, cooled down with electricity too. Yes they have generator backups, but that isn’t for us public users, that’s mainly for data backup and failover in the case of an emergency.
 
This is why crypto is particularly spooky to me. The ledger may be safe with all the crypto balances, but if it can’t be reached because “100 year flood”…