How Faux Capitalism Works In America

The U.S. stock market’s recent zigs and zags have provoked much squawking and screeching. Wall Street pros, private money managers, and Millennial index fund enthusiasts all find themselves on the wrong side of the market’s swift movements. Even the best and brightest can’t escape President Trump’s tweet precipitated short squeezes.

The short-term significance of the DJIA’s 8 percent decline since early-October is uncertain. For all we know, stocks could run up through the end of the year. Stranger things have happened.

What’s also uncertain is the nature of this purge: Is this another soft decline like that of mid-2015 to early-2016, where the DJIA fell 12 percent before quickly resuming its uptrend? Or is this the start of a brutal bear market – the kind that wipes out portfolios and blows up investment funds?

The stars in the night’s sky tell us this is the latter. For example, when peering out into the night’s sky even the most untrained eye can identify the three ominous stars that are lining up with mechanical precision. These stars include a stock market top, followed by a monster corporate debt buildup, and a fading economy. In short, the stock market’s latest break is presaging a corporate credit crisis and global recession.

The last time these three stars aligned in this sequence was roughly a decade ago. If you recall, that was when the DJIA crashed 50 percent while coinciding with a mega credit crisis and recession. We suspect that the disaster that’s approaching will be much larger, and much more destructive than the disaster of a decade ago.

Bad Habit

Astute readers will be quick to point out that government debt was not identified as one of the three ominous stars lining up in the night sky. This is not an oversight. Rather, it’s an insight.

Without question, government debt has burgeoned way beyond what even the most doom and gloom pessimist could have envisioned just a decade ago. In fact, November marked the widest one-month budget deficit in U.S. history.

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