The other four issues in Axios’s top five list refer to things we’ve discussed at length in these pages in 2017. As this year melts into next, we thought we’d excerpt our discussions of these topics for readers who have a keen interest in the extent to which America, while not the barren, bone-strewn wasteland imagined in Donald Trump’s inauguration speech, does have a set of rather serious issues it needs to address in 2018. Without further ado, we’ll take them in turn, utilizing our previous posts and passages from other sources.
Credit is the foundation of the current financial system, for credit enables consumers to bring consumption forward, that is, buy more stuff today than they could buy with the cash they have on hand, in exchange for promising to pay principal and interest with their future income.
This Bitcoin bubble will be the “pin” that bursts the more widespread bubble, just like the Nasdaq bubble burst the markets back in the early 2000s. I wrote about this twice last week, showing you how the Bitcoin bubble compares to the internet bubble, and how much Bitcoin could potentially lose when the burst happens.
This year is culminating with an event which for all intents and purposes proves that the faithful have lost their faith. That event is none other than the most over-valued, over-rated, over-hyped, over-_______(fill in the blank) unicorn known as Uber™ penning its deal with SoftBank™, which purportedly cuts it valuation by some 30%. Or said differently – by about 1/3. And that’s if you believe the metrics and math used to begin with.
Yet none of the above is worthy of Story of the Year. For that, I turn to this era’s Masters of the Universe: global central bankers. 2017 was a fateful year of central bank failure to tighten financial conditions in the face of bubbling markets and economies. Fed funds ended the year below 1.5%, in what must be history’s most dovish “tightening” cycle. The Draghi ECB stuck to its massive open-ended QE program, though reluctantly reducing the scope of monthly purchases. In Japan, the Kuroda BOJ held the “money” spigot wide open despite surging asset markets and a 2.7% unemployment rate. As for China, the People’s Bank of China was an active accomplice in history’s greatest Credit expansion......What is celebrated in 2017 will later be recognized as dysfunctional.
But, as was the case in prior cycles, sometimes the identification of headwinds is hiding in plain sight: too much debt (and cheap money), elevated valuations, too much market complacency and/or enthusiasm (hedge funds are more leveraged today than at any time since 2008 and short interest as a percentage of market capitalization is under 2%, the lowest reading in five-six years), the massive global volatility short in place, a widening wealth and income gap, political and geopolitical uncertainty and, even a relaxation of ethical standards.
Among the best-known members of the Anti-Imperialist League was Mark Twain, who served as vice president from 1901 until his death in 1910. One of Twain's most compelling antiwar writings, a short story called "The War Prayer," was considered too radical to be published in Twain's lifetime. "I don't think the prayer will be published in my time," Twain said. "None but the dead are permitted to tell the truth."
Moreover, market conditions leading up to the Slide should be familiar—they’re not too far from market conditions since Donald Trump won the 2016 presidential election. In the first year after Kennedy’s election, as in the first year after Trump’s election, inflation seemed under control, interest rates were low, credit spreads were tight, and the economy was growing. And, in both cases, the stock market was booming. Here's an updated look at Trump’s stock rally versus the Kennedy rally and subsequent Slide.
The public image of Iran as a hotbed of fanatical terrorists has been usurped since the August 1998 bombings of the U.S. Embassies in east Africa by Al Qaeda and other radical Sunni entities. The U.S. Government’s own list of terrorist attacks since 2001 shows a dramatic drop in the violence carried out by Iran and an accompanying surge in horrific acts by radical Sunni Muslims who are not aligned with Iran. The latest edition of the Global Terrorism Index, a project of the U.S. Department of Homeland Security, shows that four groups accounted for 74 percent of all fatalities from terrorism in 2015 — Boko Haram, Al-Qaeda, the Taliban and ISIS. Thirteen of the 14 Muslim Groups identified by the U.S. intelligence community as actively hostile to the US are Sunni, not Shia, and are not supported by Iran.
Zuma, the President of South Africa, currently faces possible impeachment for corruption, while Robert Mugabe has now been forcibly “retired” after 30 years as President. Surely by now, though, it should be common knowledge that in Africa, if you replace a despot, but not despotism, you only oust a tyrant, and not tyranny.