Bigger Than a Bear Market

Again, not much movement in the US stock market.

All eyes were on US politics.

The Ides of March came…and, yeah, went…with poor Marco Rubio out of the race…

Yes, it was ‘Goodbye, Rubio Tuesday’…leaving Donald Trump and Hillary Clinton way ahead of the pack in the race to win their parties’ nominations.

Meanwhile, a dear reader wrote in to complain that the Dow was up some 1,500 points since he acted on our gloomy view…and sold out of the market.

But we hold to our opinion: this ship is sinking.

As an investor, you face two kinds of risk: the risk of missing out on gains, and the risk of taking losses.

It’s up to you whether you continue to bet on rising US stocks. But our view is you will be glad you got out when you did.

Death sentence

We all live under a death sentence. Markets…societies…and our very lives must follow an unstoppable pattern.

We breathe in…and then we breathe out. We are born…and every mother’s son ever born from the beginning of time until today is programmed for death. Every ship ever built is destined for the bottom of the sea…or the scrap yard.

Up, down…in, out…expansion, contraction. Hey, don’t blame us! We didn’t invent it. That’s just the way it is. And since that is the way it is: vive la mort!

We don’t necessarily want it. But since it is inevitable, we will look forward to it, like a pair of new boots yearning for mud.

There are times to go forward…and times to back up. There are times to buy. And there are times to refrain from embracing stocks.

This is one of those times.

The Fed has stood pat on rates since December. But the Japanese, Chinese, and Europeans have continued to try to goose up their economies with increasingly crackpot monetary policies.

Much of the money thus created has found its way into US markets…which probably explains the refusal of the Dow to go down.

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Day of reckoning

It could be, of course, that we are totally wrong…and that some trend is in place we don’t recognize.

Stock markets are said to ‘discount the future’. Maybe they see something we don’t.

Or maybe they are simply preparing for a more spectacular day of reckoning by drawing more mom-and-pop investors into deeper water; as always, we wait to find out.

Still, it looks as though the bull market that began in the US in March 2009 is over. And the contraction is not limited to the stock market.

Our economy, our society, and our body politic are all closing up…looking inward…turning their backs on the wider world.

Yes, we are connecting the dots. It is not just the world of money that contracts and expands. The economy breathes, too…and so does our political world.

Why is Donald Trump running so strongly in the Republican primaries?

Why is National Front leader Marine Le Pen doing so well in France?

How did Jeremy Corbyn — otherwise a nobody — become the leader of the second-largest party in Britain?

Why is world trade plunging?

Why are inflation expectations running at about 1% for the next decade…despite the biggest increase in central bank balance sheets — the monetary footings of the entire system — in history?

Why are growth rates in Europe, Japan, and the US at their lowest levels since the Second World War?

And why is $7 trillion of government debt — about one-third of all issuance — now trading at sub-zero yields?

Warning shot

‘Economists fire warning shot on risks of negative interest rates,’ reported the Financial Times in a front-page story last week.

‘Japan’s negative interest rates backfire…’ it added, again on the front page, two days later.


Because we are breathing out. Borders are tightening up. Barriers are being erected. The ‘globalism’ heralded by New York Times columnist Thomas Friedman and others, as a solution to all the world’s problems, is giving way to ‘nationalism’.

The expansive ‘easy money’ world of the last 30 years is losing air.

Yesterday brought news that consumer savings from the lower price of oil is NOT leading to greater consumer spending…not even in autos. Bloomberg reports:

U.S. retail sales dropped in February and the prior month’s gain was revised to a decline, calling into question the narrative that bigger gains in consumer spending would propel economic growth at the start of 2016.

The decrease in purchases, which included auto dealers, department stores, and furniture outlets, showed Americans were salting away money saved at the gas pump amid volatile financial markets. The disappointing reading on the biggest part of the economy comes as Fed officials meet to gauge whether growth is strong enough to eventually warrant another increase in interest rates.

‘“We’re seeing higher rents, higher healthcare expenses, so that may be offsetting a lot of the benefit of lower gasoline prices,” said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida.

The new subprime

While current spending slacks off, past spending continues to rattle its chains. Bloomberg again:

Delinquencies on subprime auto debt packaged into securities reached a high not seen since October 1996, as late payments continued to worsen in February, according to Fitch Ratings.

The number of car borrowers who were more than 60 days late on their bills in February rose 11.6% from the same period a year ago, bringing the delinquency rate to 5.16%, Fitch wrote Monday in a report. During the financial crisis delinquencies peaked at 5.04%, Fitch wrote.

You’ll recall that, when we left you yesterday, we promised a look at the deeper malaise. This is it. It is not just the threat of a bear market on Wall Street. Not just a grumpy mood of the voters threatening the Establishment.

It is something bigger…deeper…something unstoppable…

More dots tomorrow…


Bill Bonner,

For Markets and Money, Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.
Bill Bonner

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