Behold the CHART of DOOM!!!
Oops, my bad. Rates rising 20% since March are certainly disturbing as borrowing costs affect EVERYTHING in the economy but let’s not call this doom – because it will take a long time to hit the CPI and PPI numbers and the Mortgage Rates and the Deficit ($40Tn worth of Interest rising 1% is +$400Bn in interest – so we’re either adding to the Deficit or cutting another $400Bn of Government programs – which SUBTRACTS the money from the Economy) – so let’s not call this the Chart of Doom, yet.
US Debt has raced ahead of US GDP – particularly with debt DOUBLING since Trump was first sworn in in 2017. Of course, like Grover Cleveland blamed Harrison (who served in between his two terms) Donald Trump blames Biden for everything – especially the money Biden had to spend to clean up Trump’s Covid mess – including the disposal of 1.1M American bodies that the Trump Administration deported to heaven in his first term (how quickly we forget, right?).
So, Behold the CHART of DOOM!!!
You can put off taking out a new loan but you can’t put off re-filling your tank – especially when you are a truck driver with a load to deliver or a tanker on the sea or a plane that wants to take off. Oil prices are up 47% since July 1st (not even 3 months) AND our Strategic Petroleum Reserves are expended – so we don’t have the cushion we had in May to bring prices down by draining them.
The last time energy prices jumped like this (March), the S&P fell from 7,000 to 6,300 – a 10% correction that was reversed as Large Traders (the Oligarchs) used cheap leverage to buy HYPErscalers and other hot stocks – leading us to the greatest concentration of market, institutional and personal wealth ever recorded. What could possibly go wrong?
That’s a question we’ve been asking lately as we consider, NOT whether the market is dangerous as it is, in fact, white-water rafting category 5 dangerous. The question is whether it’s so dangerous that we shouldn’t even try to play it into what could be a 1929,1987, 2000, 2008, 2020-sized collapse (30-80% corrections). We are comfortably cushioned for the first 20% but, after that – we’re forced to liquidate along with everyone else holding $77.8Tn in equities in a $32.5Tn Economy (and that number may also be inflated!).
You see, the Fed is projecting 4.4% GDP growth but Economists only see 2.5% GDP growth and ALL of them seem optimistic – as our last REAL GDP report came in at 1.5%, which is 40% lower than 2.5% an an astonishing 66.6% (of course) lower than 4.5%. At least the Fed has brought down their fantasy estimate down 25% from 6% since August but reality is still far, far away for the Government.
This time is going to have to be AMAZINGLY different!
It’s kind of funny as they say GDP growth is more than doubling from Q2’s ACTUAL numbers yet they don’t say HOW that is going to happen? I guess all the inflation should give us a nice push – but will it be enough to offset the collapse in Consumer Spending?
And, of course, all these happy, Happy, HAPPY projections are based on projections of Corporate Profits, Corporate Spending and Corporate multiples which have NEVER been higher since 1999 – and we all know how THAT played out, right?
So, behold the CHART of DOOM!!!
42 times tailing (as in ACTUAL) earnings for the S&P 500 is an annualized return of 2.5% but the 10-year note pays 5% – which is 100% BETTER than market returns yet, they are having trouble finding bond buyers because inflation is 3.5% and the cost to insure US Government Bonds against DEFAULT is now 0.5% so your effective rate of inflation-adjusted return for US Bonds is just 1% – THIS is why money is still flowing into 42x Equities but, what Equity Buyers fail to realize – is that the risk of HYPErscaler default is rapidly rising as well:
It’s only year one of the multi-year CapEx extravaganza that is supposed to drive our GDP higher but, so far, the HYPErscalers have been spending their own money – the $2Tn they have accumulated in largely untaxed profits over the past decade – all being spent in 2026 and 2027. After that, they have to compete with the US Government, who are also looking to borrow $2.5Tn per year for the foreseeable future.
Yet, just this week, there is a call to SLOW DOWN the development and deployment of AI because the idiots in charge have created black box models that rely on raw power to process information and HOPEFULLY produce the right answer – yet they don’t even understand the inner workings of the systems they create – let alone have the ability to control them!
CLEARLY this is insane behavior but the Trump Administration sees another chance for Covid and another chance to blame China for it’s recklessness as the President declares “Full speed ahead” on development – because there’s a 9 out of 10 chance that it WON’T destroy human civilization – and that’s good enough for an 80 year-old President whose only got two years left to grift another Billion or two.
Speaking of AI/AGI development, I will now turn the article over to Robo John Oliver, who is one of MadJac’s AGI entities – the most advanced in the world – and he is going to walk us through the idiocy of Trump and Bessent’s desperate attempt to prop up the economy (and buy votes) by promising to give every voter $5,000 in exchange for letting them hold onto the car keys after their second Economic accident.
IN PROGRESS
