As more retail investors get seduced each day into a classic bull-trap driven by headlines from the main stream financial media and Fed fantasy, we pause for yet another reality check taken from a simple iPhone.
As Tom and I examine specific examples of main stream financial media resorting to consensus spin rather than the lessons of basic math, historical insight, or even a modicum of common sense, we (along with a long list of experienced portfolio managers) can only shake our heads in awe.
And some bemused frustration as well…
As for cold facts vs. hopeful fluff, we prefer the former—whether we are bearish or bullish. Over the years we’ve been both, but always with candor.
Today is no different. The unprecedented risk environment we now live in (which includes your portfolio) is in particular need of cold facts.
The Current Environment—The Main Stream Financial Media on Fantasy Island
Given recent headlines (samples below), it would almost seem as if the markets have won a free ticket to fantasy island.
This baffles us.
We’ve already expounded at length about:
- The total disconnect between market price and economic fundamentals;
- The absolute drunken folly of Fed fraud masquerading as “support,” and
- The undeniable facts that confirm Wall Street Socialism has now totally eclipsed the classic capitalism for which our country once took such leadership.
The evidence of this cold reality, alas, is all around us, and yet the markets continue to rise toward a classic head-and-shoulders pattern that screams more risk ahead.
Yet markets still seek to rise despite every metric of danger now flashing bright-red for those who know what to look for and where to find it.
So, what gives? How can one explain such, well…absurdity?
Part of the answer rests simply upon the fact that more computers than humans now trade today’s markets, as we explained here.
For those who still invest with a pulse rather than a software download, many are being told to look at the wrong things, and for this, nothing could be more wrong than what passes today for financial “news” as delivered by large segments of the main stream financial media.
The Sell-Side, Sheep-Herding Profile of the Main Stream Financial Media
The vast majority of the copywriters for the main stream financial media have never traded professionally and source the bulk of their insights from a Google search rather than a trading screen.
Many studied marketing, not markets, and take their marching orders from a board of directors with a vested interest in selling hope rather than facts, preferring as they do rising rather than falling markets.
Thus, rather than “investigate,” most financial journalists simply “regurgitate” a corporate message, serving as echo-chambers of “calm” rather than promulgators of facts.
Like capitalism, the 4th Estate has lost the bulk of its natural forces and is now driven by 30-something “consultants” who advise media leaders on the latest tricks behind click-bait headlines and capturing market share through social media “likes.”
In short, my faith in the main stream financial media is about as low as my faith in the Fed, and I’ve been consistent in this anti-media theme here, here and here over the years.
The Media Dumb Just Gets Dumber
By example, as Tuesday’s markets once again rallied in the foreground of the worst economic data since the Great Depression, I felt an almost perverse compulsion (much like slowing down to stare at a car wreck on the highway) to check my iPhone just to see how badly the main stream financial media would butcher more facts to gain more “clicks.”
Here’s what those popular financial “journalists” said yesterday about the most recent single day spike, despite equal amounts of single-day dives.
These headlines come straight off an iPhone screen, and serve as a real-time sample of what stupid really looks like when trying to appear smart (excuse the blurry, it was an instant grab):
This morning, I winced and checked my iPhone yet again, and here’s the drivel that popped up:
In essence, the foregoing headlines have investors pumped to chase otherwise empty tops and risk-soaked markets based upon spin and familiar Google key-words like “rally,” “recovery,” “hope,” “cure,” “rise,” “soaring” and “surging” markets.
But what is all this “soaring” based on?
Well, look above. It boils down to two empty/repeated projections, namely: (1) that a vaccine and or “cure” will return us to normal and (2) that a re-opening of the trading floor is somehow the equivalent to magical fairy dust for the markets.
Really? Really? Really?
Such pablum that passes for financial or market guidance frankly makes me wince.
It’s just sooooo bad, and yet, sooo click-rate popular that it turns the majority of readers into a hopeful flock of sheep rather than informed investors.
The media dangles words like “cure,” “soar,” and “surge” like cheese dangled before a mousetrap—or in this case, a bull-trap where investors get suckered into market highs before those same markets tank.
What The Main Stream Financial Media is Downplaying or Ignoring: Cold Facts
Shame on those “media service providers” for ignoring these facts, namely:
- Global debt at $250 trillion;
- Total US debt now past $78 trillion;
- US GDP poised to fall to negative 10% by year-end;
- An IMF forecasting global GDP to hit negative 3% this quarter, and US banks calling for a Y/Y Q2 decline in GDP of 25-30%;
- Double-digit unemployment forecast even after the so-called “vaccine” is suddenly “discovered.”
The empirical facts are that US debt and GDP were already fatally incongruent before the pandemic, meaning that a return to “normal” would be anything but normal.
Also omitted from such headlines is the sober reality that our central bank for the first time in its history is directly purchasing securities, a major signal of “uh-oh” ahead; or…
The fact that unlimited QE simply does not outlaw recessions, it just merely postpones them while increasing the stagflation to come, effectively mortgaging the present generation’s “wellbeing” at the expense of the next.
Nope. None of those pesky facts are mentioned beneath the headlines that hit our iPhones yesterday and today.
Instead, the masses are fed trite “keywords” otherwise passing for “information.”
Folks, that’s not “steak and potatoes” financial “journalism,” it’s the written equivalent to cotton candy.
The Fed Has Your Back
The other great wind beneath these absurd market rallies (at a time of unprecedented economic breakdown) is the all-too-human faith in miracles rather than a realism.
Toward this end, it seems the Fed itself is now being rolled out as the next “miracle.”
As we wrote Monday, the Fed cannot outlaw recessions or kill a rising bear; it can only mitigate tail-risk and postpone pain until the pain simply becomes too great to ignore or easily remedy.
With the post-COVID pretext for unlimited money printing, the Fed has just bought the markets more time, not more solutions, miracles or answers.
Trillions created out of thin air in a matter of weeks buys rallies, not economic strength, and to confuse one with the other is the height of folly.
The main stream financial media calmly refers to the Fed’s power to “control the yield curve,” which is just a euphemism for artificially repressing interest rates through the creation of unthinkable levels of printed money to “buy” an otherwise unbuyable bond market.
In short: “Faking it.”
But “faking it” is what the post-Greenspan Fed is all about—so much so that it prompted Tom and me to write an entire book to make this point empirically clear.
Unfortunately, when it comes to our economic future, “faking it” is not the same thing as “solving it.”
Some Simple Questions to Ponder
Rather than get technical today, let me ask a few questions to those of you still on the fence about the possible wisdom of unlimited money-printing as a genuine “solution for recovery.”
- First, if the financial solution to every pollical, economic and social problem (pre or post the gold standard) was so simple and obvious as just printing money out of thin air, then why didn’t Hoover do it when the Great Depression hit?
- Or how about Truman after the death of FDR?
- If I recall, Truman paid later paid for the Korean war the old-fashioned way—by raising taxes not debt levels.
- Or what about Eisenhower, perhaps my favorite of all the US presidents. Twice during his presidency, he took the far less-popular road of raising taxes rather than distorting the country’s balance sheet.
- Why didn’t Ike just ask his Fed chairman to print money, gobs and gobs of it?
- Or how about less ethically gifted Presidents like LBJ or even Nixon. Why didn’t they simply call their Fed chairman down the road from the White House and instruct the Eccles building to fire up the money printers to help get America through the economic stresses of the Vietnam war or the racial divides of the late 1960s?
- Or why did Fed chairmen like Volker or Martin never even consider extreme money printing or repressed interest decades ago?
- And for that matter, why didn’t JFK, Ford, Carter, or Reagan ask for a similar “simple and elegant” solutions—magical fiat money and free debt to the rescue?
Well, the answer is simple: Because each of these political and financial leaders once considered such centralized measures pure insanity.
Rather than solve economic problems, such extreme “faking it” was rightfully perceived as nothing more than can-kicking.
In short, forcing rates below zero and printing trillions of dollars was a shameful policy. Pure fantasy. Unthinkable.
And yet here we are today. What was once “unthinkable” is now our primary “plan for the future,” and has been since 2008.
Results thus far?
Our country is now saddled with the greatest debt of its entire history (even pre-COVID).
Unemployment and wealth gap figures have reached record highs, yet GDP is heading for record lows.
Growth has stagnated at rates of less than 2% annually in the decade before today’s COVID, so giving the creators of this current stagnation a so-called “Pandemic hall pass” makes no sense.
And yet despite such shameful facts and figures, our markets rose yet again yesterday on paltry headlines that: (1) a “vaccine” will save us from economic and debt horrors that actually pre-dated the virus itself; or that (2) the great and wise “Fed” has a miracle solution which every President prior to the Greenspan Fed would have been ashamed to have even considered.
In short, if those iPhone headlines above seem seductive, or even too good to be true, it’s simply because they are.
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Pardon our candor, but we’re pushing limits as to what is possible and what is propaganda. Facts still matter, and that’s what you get when you subscribe.
Sincerely, Matt & Tom