37.   When Dementia Replaces Meritocracy – When Shortage becomes Surplus

America’s Nero, known as Biden or Brandon, held a party Tuesday with James Brown as the headliner.  The Democrats/Marxists celebrated the signing of another $700 Billon boondoggle of wasted spending that will further increase America’s debt and thus act like gasoline thrown on the inflation fire.  In stark contrast, in the real world e financial markets were burning down.  The only thing missing from being equal to Nero was that no Christians were impaled on shafts covered with oil used as torches.  Was that the fault of staff not following up on Dark Brandon’s famous speech?

A frustrated petroleum trader yesterday asked if the Biden Administration thought they were day trading in the petroleum market using the Strategic Petroleum Reserve (SPR).  The interviewer replied that given the demonstrated skillset of the Biden Administration, they would think they had accomplished something good by selling our SPR oil at $75 per barrel and then refilling the SPR with $125 per barrel oil.  Currently DC is a sad collection of misfit toys driven by fear of their evil acts becoming known. It is Biblical in proportion.

Monday, I listened to a podcast of a financial market analyst discussing whether inflation had peaked and was that why financial assets were acting as if all downside value risk had evaporated. The analyst spoke for 40 minutes and basically said nothing other than her belief that the market was usually correct.  NADA. NOPE. Not when it deludes itself.

Reality arrived Tuesday when the Commerce Department reported the inflation data for August was HOT despite a strong decline in gasoline prices.  The Dow lost over 1,200 points, and both the S & P and NASDAQ had similar loses while the bond market fainted.  The financial markets have been pricing assets based on their hope The Fed will pause raising the Federal Funds rate. 

As we have discussed many times in this blog, new home construction is an important leading economic indicator.  This recession, not counting the Pandemic Recession, is the seventh in my career.  At the peak of each of those residential cycles, home builders were in a panic thinking they had a shortage of lots.  But once the bubble burst, they realized they had a surplus of lots.  Same number of lots, but a plummeting absorption rate changes the equation.

This week I had conversations with some home builders on the front-line. Nationally, home builders realize they have a surplus of lots and are trying to unload the extra. Currently the surplus problem is worse in the Midwest and western markets.  But The Fed is focused on fighting inflation, so they will raise rates until something(s) break.  Increasing interest rates equals declining economic activity.  With CPI at 8.1% and Core Inflation at 6.3%, The Fed needs to raise rates to at last 6.8% if not 8.6%.  Thud ahead!

With the European countries trying to figure out how to subsidize the cost of energy for consumers, those governments are discussing hundreds of billions of Euro/Pound debt on top of their already massive debt.  The USA is the cleanest dirty shirt in the laundry basket, but Biden and the Democrats/Marxists have made it a close race with the Europeans.

Here are my current guesses as to what The Fed breaks:

1.  Hedge Funds – I look for a massive collapse in the hedge fund arena.  Since they are not publicly traded, we must wait to find out the winners of the Hedge Fund Collapse Derby.  The ripple effects will impact major banks which will play out in 2023, propelling our economy into the depths of this recession.  

2. Sovereign Debt – The country of Sri Lanka could not handle its “Belt and Road” Chinese debt, so it collapsed.   They win the “Sovereign Debt Collapse” derby.  But there will others and those impacts will ripple globally which if combined with the hedge funds could propel us into a depression.

I must admit it has been fascinating to watch the Biden Administration constantly be out of step with the majority of Americans.  Their performance has been worse than Keystone Kops because this is serious, not a comedy.  However, it is a drama reminiscent of one of my favorite Biblical characters, Nicodemus.  As a member of the Sanhedrin, Nicodemus had power, prestige, and wealth but realized he was lacking something.  So, in the Gospel of John we read of  Nicodemus approaching Jesus. The one with earthly possessions came to realize he really had nothing.

Europeans will have a cold, dark, hungry winter because they bet their countries on Green Energy which is a hobby not a serious source of energy.  America will replicate that experience unless we have a complete change of leadership by electing people who are concerned about their fellow Americans not focused on making China wealthy.  Hopefully, when this unfolding disaster is over, ESG and Green Energy will be completely discredited.  We are witnessing the wages of sin playing out in America and around the globe. 

The biggest sources of potential Black Swans are China, Russia, Iran, and North Korea which are an evil axis reminiscent of The Axis in World War II.  The best summary of the land market is – short term pain but long-term gain.  Hopefully Americans will successfully thwart the intentional destruction of the most amazing country in the history of the world by mentally ill heathens and pagans.  Fortunately, God is in control.

Please pray:

1. That God exercises his control over our government at all levels.
2. For the “Forgotten 599” surviving Americans being held as political prisoners by Biden and the Demented Marxists in hell hole conditions in the DC Gulag.  
3. For honest elections because without them we are not free.
4. For the valiant Ukrainians.

Let’s Go Brandon!

“Nicodemus said to him, “How can these things be?”  Jesus answered him “Are you a teacher of Israel and yet you do not understand these things?”’

(John 3:9-10)   New Revised Standard Version, Oxford University Press)

Stay healthy,

Ned 

September 14, 2022