Other than a tornado watch, it’s a pleasant Sunday afternoon in North Carolina. Time for a big picture update. I went through my data (will be 20 years in January 2019). Here’s what it showed.

1. The time between Greedometer sequences has dropped following an exponential decay curve. This suggests the economy and stock market keep crashing and being saved by policies that don’t solve the problem and buy less partying with each intrusion.

time between Greedometer sequences

2.  The pace of S&P500 crashes / crash initiations is represented by the mini Greedometer baselines as follows….

mini Greedometer baselines

 

3. Here’s what stopped each crash

crashes stopped by this

 

To be complete, the mini Greedometer 12 sequence has been warped slower but not stopped yet. I expect the Fed to back away from a 4-rate hike 2018 position and slow the sequence (make the mini Greedometer 12 baseline flatter).

Some of you are going to think central banks are omnipotent and can stop any crash. Could be. Meanwhile I want you to consider that while central banks have repeatedly slowed and stopped stock market crashes over the past 20 years (11 times so far), here is what the cost has been:

  • debt to GDP in the U.S., Canada, Europe, Japan, China, India, hell… everywhere has gone way up
  • corporate balance sheets are bloated with debt as they issued new bonds to buy back their own stock (Ponzi finance defined)
  • personal balance sheets are bloated with debt
  • central bank balance sheets are sitting on over $20T in assets that will need to be sold or otherwise unwound. Any guess how that happens without crashing global asset markets?
  • the largest housing bubble (2016-2018) and 2nd largest housing bubble (2005-2007)

housing bubble 2.0

 

  • real personal incomes in the U.S. for the bottom 90% have stagnated
  • income inequality has reached levels never seen before
  • velocity of money has plummeted in the U.S. and Europe (I’m too lazy to look into Japan, China, Canada, India, elsewhere but I’m betting it has fallen there as well). You should care about this because as velocity of money falls, central bank efforts become less effective -> the monetary policy cavalry will be less able to save us as they’ve been doing for the past 20 years.

M2 vel

  • growing anti-central bank sentiment –because it is increasingly becoming clear to the bottom 90% that they’re not being helped as much as the top 10%
  • growing anti unity sentiment in Europe because the profligate have spread their high-risk sovereign debt throughout all of the Eurozone. How’d you like to be Dutch or German and be force-fed a diet of bonds from Italy, Greece, Portugal, Spain?
  • increased political discord / polarization in the U.S. as voters increasingly desperately are lead by populists promising stupidity like “Make America Great Again” via an unfunded tax cut that will only make our long term fiscal health worse!  SINCE 1980 THE U.S. HAS NEVER GROWN ITS ECONOMY WITHOUT MAKING DEBT TO GDP WORSE!  REAGAN MADE DEBT TO GDP RADICALLY WORSE VIA TRICLE DOWN. SAME CRAP FROM BUSH II TAX CUTS. SAME TAX CUT CRAP FROM TRUMP.  Yes Democrats made debt to GDP worse too –but no one really expects Democrats to make hard fiscal decisions. Turns out you cannot expect Republicans to make hard fiscal decisions either.

Does it look like more central bank intrusions will suddenly lead to sustained stability?

 

There’s your update.