Courtesy of Russ Winter of Winter Watch at Wall Street Examiner
"Suspend disbelief… Anything can happen in a crash, there are machines making the trades and they have no respect for the prestige or standing of a particular company.”- Joshua Brown
The whole bogus neoclassical economic melded with neoliberalism model as a way of life is now in the process of collapsing. Ultimately, that’s a good thing. I’ve treated debt issues ad nauseam as a cancer that’s killing the patient. My view is straightforward: The banksters and kleptocrats need to be handed a large measure of the losses or the economy and in turn the markets will continue to steadily erode. If the parasites take a cold-turkey hit and many fail, this will all come to a climax. If the loses are properly distributed, there will definitely be a financial crisis (FC); but an FC should be distinguished from an economic crisis (EC).
There has been an EC for quite some time, and now there’s also a political crisis (PC) developing. There are markers to gauge it as well. For instance, if this Oct. 6 Day of Rage turns out 100,000 people and spreads, take note. If it’s a dud, then we’re in deep trouble. Just don’t underestimate public sentiment right now.
In the context of what I am describing, an FC in conjunction with a PC would set up a great, climatic buying opportunity for the real economy. Will October be the confluence of an FC and PC? I recognize that I can be idealistic about such things, but I’m also cynical, especially about the price to be paid. The saying “I’m from Missouri, the show-me state” applies, even though I grew up in Kansas. I’m a fellow traveler and a deeply cynical idealist with a vision of what should happen. If it’s business as usual, I’m going to re-short this market at the overhead convergence (mostly likely 20 DMA).
With the approach of the very definition of a bear market (20% drop) and with investors still facing near-zero returns on funds, it’s natural to contemplate some opportunity somewhere to at least offset inflation. In general I would caution against this right now. This is the kind of market that could easily replicate some of the deep value seen in early 2009. That said, I have to take note when I see some of the names I played off that bottom that are now within shouting distance of those levels.
Besides debt, excessive maladjusted money printing and a failed political system, the whole planet faces a permanent high-cost energy problem. The free ride on fossil fuel is over. On a secular trend basis, energy will remain elevated indefinitely. Interestingly, when I drill down looking for deep value, the markets have already severely smashed companies involved in the solutions and transitions away from extreme dependency on dirty fossil fuels. What we need to see is the end of the neoclassic economic model and more of an ecological model that prices negative externalities as it applies to energy.
The sector to leverage all this is clean or transitional energy, renewable alternatives and energy substitution technology — not oil. If the neoclassic model is junked, this sector will boom. If Weekend at Bennies and other central banks continue destructive money printing, money will simply find its way back into energy (and by extension renewables) as a crack-up-boom play. No doubt pigeon holed into the ludicrous “risk-on” trade, the stocks in the sector are priced as if they’re nearly finished because of cyclical inventory issues and waning of government supports. Those issues, plus a big drop in oil, already seem priced in, but suspend disbelief it could get even worse.
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