The Morning Line

  What could possibly go right in 2022?  Merely posing this question is courting ridicule from some quarters, since we have grown an asset bubble with the disaster potential of 1929's. Still worse is that it sits on a geopolitical powder keg as big and dangerous as the one that detonated a decade later. Under the circumstances, the best outcome imaginable would be for the Dow Industrials to be trading at or near current levels come December, for that would imply economic Armageddon had been postponed for yet another year and that Covid bloviators had taken our minds off much bigger problems.  But at what cost? The Fed already has $8 trillion of manifestly unpayable Treasury debt on its books, and piling up more of it in order to keep stocks and real estate from crashing will only deepen the inevitable damage when the bubble pops.  That's why the very idea of a 'taper' seems so ridiculous, even if the mainstream media take this logistical absurdity seriously. Why would Powell & Co. tighten credit when merely hinting about it causes the stock market to dive unnervingly?  Worsen the effect with actual tightening and you risk throttling an asset mania that has indefinitely postponed the collapse of the U.S. economy and the onset of a deep depression. ...or Wrong Two assumptions that could go very wrong in 2022 illustrate the treacherousness of the mine field in front of us.  First is the notion that a semblance of political leadership will be restored when the Republicans regain control of Congress in November. There are good reasons to think voters will turn out in droves to neutralize the already senescent Biden and repudiate the destructive political agenda of the hard left. But what if a bear market comes first, pitching the U.S. into

Happy New Year and welcome back!  Things are beginning to return to normal at Rick's Picks following the disastrous rollout of a new web site earlier this month by a company that had been working on this project for ten months.  I've restored the old Rick's Picks pages and replaced the firm with the highly capable Brian 'Catman' Catalucci, who previously worked as my system administrator. I will keep my comments brief, since there is still some troubleshooting to do this evening to make certain this essay displays properly on the home page and reaches you via email. Mainly, I want to mention two no-brainers that should help you start 2022 with zero confusion about the global economic picture.  The first is the dollar, whose chart is displayed above. You don't have to be a technician to see that this picture is bullish. And even if the greenback is about to work its way lower in order to build a base for the next big rally, there is nothing to suggest that a collapse is even remotely possible, let alone imminent. With that in mind, you can safely tune out all the yo-yos who have been screaming for your attention with predictions of a horrendous inflation. It's not going to happen, and the real challenge for us all, including the charlatans who run the central bank, will be dealing with the catastrophic deflation that is coming with the next bear market. There's Still Time The good news is that the Papa Bear has not yet arrived, and there is still time to shift your money into Treasury paper and bullion assets. Both remain unpopular, which quite often is sufficient reason to invest in a particular asset. You can raise cash for this by dumping bull-market effluvia, including FAANG stocks, private

Mr. Market blew a great opportunity on Friday to scare the hell out of everyone, concluding the session with a mild short-squeeze rather than the devastating rout that Wall Street's years-long wilding spree so urgently needs. The continuing ascent of Apple shares as always remains key to the global illusion of prosperity and the surreal expectations of portfolio managers; and that is why, as last week’s commentary pointed out, the stock is not about to go quietly into the night.  It struggled nonetheless last week to make headway toward a 187.93 target after peaking on Wednesday at a record-high 170.20. AAPL subsequently sold off hard for all of about ten hours, then limped to the finish line to end the week in a way that could have satisfied neither bulls nor bears. The rally target, a very major one, remains viable, but we’ll need to monitor AAPL's progress toward it closely, since fears of Omicron, the latest supposed Covid variant, are threatening to strangle the global consumer economy yet again. When the week ended, Fauci and his benighted lackeys in the news media seemed eager, if not to say desperate, for someone to die, or at least be hospitalized for a few days, lest an opportunity be missed to roll out another booster shot and to stoke the public's antipathy toward the unvaccinated to new extremes. Alas, press releases from health officials in South Africa, Omicron’s apparent ground zero, only served to mitigate concerns that the variant might be the devastating killer that so many politicians and bureaucrats must be hoping for. Stocks Are Topping Meanwhile, with Western Civilization in mid-stage collapse, the stock market continues to feel like it’s in a sympathetic topping process. However, it takes a little imagination to concoct a scenario in which the practically unlimited

Mr. Market blew a great chance to scare the hell out of everyone on Friday, ending the session with a mild short-squeeze rather than the rout that stocks so desperately need. AAPL as always remains key to the global illusion of prosperity and the lofty aspirations of pension fund managers, and that is why, as last week’s commentary suggested, it is not about to go quietly into the night. The stock struggled nonetheless last week to make headway toward a 187.93 target after peaking on Wednesday at a record-high 170.20. It subsequently sold off hard for all of about ten hours, then muddled to the finish line in a way that could have satisfied neither bull nor bear. The rally target, a very major one, remains viable, but we’ll need to monitor the stock closely in case omicron fears threaten to kayo the consumer economy yet again. When the week ended, Fauci and his lackeys in the news media seemed eager, if not to say desperate, for someone to die, or at least be hospitalized for a few days, lest an opportunity be missed to roll out the booster-shot-of-the-month. Alas, press releases from South Africa, omicron’s ground zero, only served to mitigate fears that the latest Covid variant, if it is one, could be the devastating killer that so many politicians and bureaucrats are hoping for. For its part, the stock market continues to feel like it’s in a topping process. However, it takes a little imagination to concoct a scenario in which the practically unlimited quantities of ginned-up money that have powered the bull market could dry up. Consider that companies with tens of billions of real dollars of surplus cash go out and borrow funny money because, apparently, they want to save the good stuff for…exactly what? Certainly

Friday felt like a Pearl Harbor attack on Wall Street. Since when did a Thanksgiving Friday fill investors with dread and fear? The day was supposed to have passed quietly, with second-string prop desks locked on a glide path into what remained of the four-day holiday. Instead, the Dow plunged by 900 points, closing near the low of the day after a couple of failed rally attempts while the 'value'-weighted Russell index fell by nearly 4%. One might have inferred the markets were finally rebelling against all of the arrant falsehoods that have pumped them full of unnatural vigor, especially over the last year-and-a-half as the global economy has tottered. Everything was topsy-turvy as the week ended: T-bonds were screaming, the FAANGs so beloved of portfolio managers were getting pulped, and bitcoin, the speculative Porfirio Rubirosa  of this era, was immersed in molten hell. A more than $3,000 decline threatened to become the beginning of a crypto bust. Hold the Bubbly! A few of my colleagues had predicted a major top about where it occurred. Peter Eliades got closest with a magic number for the E-Mini S&Ps that caught the high within a point. My own projection missed by 20 points, or less than half a percentage point -- close enough for an honorable mention. That was until I had a closer look at AAPL's chart. The stock got hit hard, down almost 3%, but there is no escaping the fact that if it were to fall a further 5%, to 146, it would become an even better 'buy', according to the rules of my Hidden Pivot Trading System. Since AAPL more than any other stocks reflects the zeitgeist of portfolio managers, not to mention their greed, hubris and stupidity, we shouldn't be too hasty in assuming that Friday's carnage

Did you notice last week's tone change? The whole, eternally benighted world of pundits, economists, Bloomberg news producers, forecasters et al. has been disbelieving the bond rally as the Fed's ultimately unredeemable portfolio of Treasury debt has grown from merely massive to intergalactic in size. Now the talking heads are having to change their tune in order to catch up with charts that have been no worse than neutral on T-Bonds for months. So what "story" are they telling themselves to explain what they were unwilling to see back in January? Simply that we are witnessing a global "flight to safety" as Covid threatens to tank the economies of Europe and China yet again. Of course, nothing says "safety" like the whole world piling onto the shoddy, brittle edifice of U.S. debt. Trust your instincts: This trend cannot end well. In the meantime, the technical outlook calls for at least somewhat higher T-Bond prices and correspondingly lower yields. On the long bond, that would imply a descent to 1.70% from a current 1.91%. If that level is breached we could see 1.54%. At some point, the lower rates accompanying a bear market in stocks will be seen as reflecting not a flight to safety, but as a manifestation of the catastrophic deflation that has been bearing down on the financial planet, steadily gathering size and strength since the S&L crisis of the early 1990s. Dollar Short Squeeze = Deflation While economists have kept busy trying not to acknowledge that T-Bonds are moving in the wrong direction, a rising dollar has equally confounded them, as well as investors who bet on inflation. Although lower yields are ostensibly benign, albeit faintly symptomatic of the coming deflationary bust, a strong dollar is capable of wrecking the global financial system overnight. I've written here

John Doerr, the venture capital zillionaire, thinks America should go all-in on measures to control the weather. Although Doerr fears it may be too late to save Earth and its inhabitants from the ravages of global warming, he says a massive investment program would still be better than doing nothing. His role model is FDR, who put America on war footing with astounding speed after the Japanese bombed Pearl Harbor. The tycoon and those he hobnobs with have so much money that they could be forgiven for being unaware that America is broke. Sure, there's plenty of 'wealth' tied up in stocks, bonds and real estate. But valuations are so pumped with hot air that we might as well write off three-quarters of it, since it will vanish anyway in the next bear market. Plunging share prices will bring many painful epiphanies, including the realization that every dime of the nearly $30 trillion owed by the U.S. Government-- which is to say, owed by taxpayers -- will have to be repaid: if not by borrowers, then by lenders. That is the inexorable logic of deflation, and when it comes we will be too busy dealing with the implosion of Social Security, Medicare and Baby Boomer retirement plans to be gung-ho about taming the weather, were this even possible. Democrats to the Rescue! By then, Americans won't feel much like spending tens of trillions of dollars for coal-plant scrubbers, thorium reactors, Wyoming-sized solar arrays and recapturing methane at wellheads. Galloping to the rescue, Democrats will propose a new tax on gasoline to jump-start 'Build Back Weather'. But the sums required just to get to the first stage of this guaranteed boondoggle would dwarf whatever could be raised with a surcharge of even $10 a gallon, not that anyone would still be

Who could have predicted that a microchip shortage would threaten to seriously impair the global auto industry? And yet, here we are: assembly plants are unable to ship enough cars to meet demand, and buyers are facing six-month delays and steeply rising prices. This has pushed used-car prices beyond the reach of those who can't afford showroom new. We sense that the problem could be worse than the industry is letting on because "experts" are saying bottlenecks could persist until the end of 2023. Whom do they think they are kidding? The global economy is so screwed up right now that even a team of MIT eggheads using a supercomputer and petabytes of economic data couldn't predict where interest rates will be in 30 days, let alone in two years. To say the chip shortage might drag on for a couple more years is to all but concede that it's likely to persist indefinitely (sort of like the Fed telling us they might consider tightening "next year"). Rosary Bead Shortage The shortages that have cropped up so far have taught us that predicting what will be in short supply next takes imagination. Bicycles, surfboards, certain prescription drugs, ships and shipping containers, workers in many sectors, including construction, trucking, retail, restaurant, hotel and manufacturing -- all are in critically short supply at the moment. They are also economically tied, often in obscure ways, meaning that a shortage of pasta could eventually affect the supply and demand for accordions, Chianti and Rosary beads. It has also put consumers on high alert, ready to hoard household items a nanosecond after the mere rumor of a shortage hits the blogosphere.  It is predictable that there will be food scares this winter and that they will get the kind of attention that will make us

So much for seasonality. Bears were counting on the cyclical fury of autumn to rebuke revelers, but instead it is they who got rebuked, and badly. The stock market's strong rally during the traditionally difficult month of October has left many wondering what it will take to pop the bubble. It is almost invariably a combination of factors that virtually no one has precisely foreseen. But this time, predicting the onset of the bear's inevitable arrival would seem to require a bigger leap of imagination than in the past. For how does a bull market end when it is supported by seemingly unlimited quantities of money ginned up by the central bank? Deliberately tightening credit cannot be the answer, since the Fed understands that this would not only reverse the bull market precipitously, it would also doom pension funds, the Baby Boomers' retirement plans, artificially high real estate prices and a consumer economy already ravaged by the pandemic. The eventual outcome would be a global economy plunged into deepest depression.  This is coming anyway, but don't expect the Fed to set itself up as the obvious cause. And so the game goes on. The money from trees finds its way into the stock market in numerous ways, one of them being corporate buybacks. According to a recent article at Zerohedge, fully 40% of the market's rise can be attributed to this source. Some of the companies that borrow for buybacks are sitting on surplus cash of their own amounting to billions or even tens of billions of dollars. Why use real money, they have concluded, when they can borrow it at near-zero rates by issuing bonds to yield-starved investors?  And so they continue to plow borrowed money into their own shares, driving the shares into outer space without producing a