The endless crash

As American inflation came in steamier than Meghan Markle on an old ‘Suits’ episode and as the S&P was beating a sorry-ass retreat from its recent record high, some wag sent me the chart below.

I’ve seen it before. Like, lots of times. It seems in every instance when equity markets hit a new plateau some genius trots out a chart of the two or three years preceding the 1929 crash and supers it over the latest advance. It always fits.

“See!” the doomster cries. “They’re the same. Big crash coming. Go to cash! Buy gold! Or Bitcoin! Assault rifles! Or tuna and toilet paper!” This time we’re told there’s a .94 correlation between the S&P 500’s experience then and its reality now. And heaven help the poor, delusional grasshoppers who do not head for the bunker.

Well, as you may know, the S&P regained all of Tuesday’s ground by Friday morning and once again zipped past the 5,000 mark. Green arrows everywhere, even for bond prices as yields fell and the scary inflation stat of two days earlier faded from memory. Once again investors and Mr. Market focused more on solid economic fundamentals, corporate earnings and the certainty interest rates will fall – just not as fast as the cowboys wanted.

By the way, here are the latest odds: a Fed rate cut of a quarter point in June – 53%. A chop of a quarter to a half point in July – 75%. And a cut of half to three-quarters of a point in September -73%.

Meanwhile markets have powered ahead on recent GDP growth of over 3% (annualized), unemployment mired well below 4% and satisfactory corporate earnings. The Magnificent Seven continue to pull the market ahead and everybody is trying hard to ignore Donald Trump, his faux-immunity claim, multiple criminal trials and message to Putin (who apparently just murdered Navalny) that it’s now okay to attack a NATO country that doesn’t pay enough for protection (like Canada). By the way, homebuilder sentiment in America just climbed to a six-month high. The latest PPI (supply chain pricing) was hot. And (as reported) CREA says Canadian resales have turned a corner.

Now against this backdrop of record stock values, US economic strength and the expectation of a soft landing and central bank retreat, you have to ask: why are there so many pissy people? Clearly market and economic fundamentals bear no similarity to 1929. And after arguing on this blog for years that rates could never rise (because society would collapse), why are people screaming that they now cannot fall? Where does this nihilism and negativity come from?

As mentioned before, it seems there are two drivers. A lot of folks who don’t have what they want and believe they deserve (mostly, a house) are rooting for economic mayhem. That way the over-indebted will be crushed and real estate will be cheap again. Of course, the economy would be in shambles, but in revenge, everything is good except logic.

And then we have the politically-motivated. They want collapse and misery (as do the Trumpers) so there’ll be a regime change. It’s why Republicans in the US stopped a fix-the-border bill, in hopes the migrant crisis will explode further and tarnish Joe Biden, while they purport to be the fix-the-border party. It’s why Pierre Poilievre encourages people to believe ‘housing hell’ and ‘Justinflation’ have turned Canada into a shithole country (when real estate angst and cost of living increase, post-pandemic, are global) and only he can save us.

Interest rate declines, a stable housing market, wage increases, new hiring and a soft landing would favour the governing party. So the guys in opposition want none of it.

Likewise, those selling precious metals, crypto and pricey investment newsletters want you to believe stocks are a gamble and record high prices can only bring an epic collapse. They are doomers of convenience who know that of all the human emotions, fear is the strongest. The most motivating. The deepest.

Sure, we have issues. We also have solutions. Is there anything Elon Musk can’t fix? Or Taylor Swift make you forget?

Seriously, life’s getting better as we lurch from the global pandemic. Don’t let a few shills steal your confidence or hope.

About the picture: “Frequent reader here, responding to your call for more dog pics,” writes Kaye. “The ultra-elegant ‘Roo (Polkaroo) is a frequent visitor at our house. Here, she proudly poses by her tufted pillow portrait. She’s a rescue from a backyard breeding situation. Took her about 6 months to relax and settle in to her new name, diet and over-all improved circumstances but she’s become calm and trusting and is very grateful to have seen the last of her puppy-making days. She’s a very cat-like dog who won’t fetch, do tricks, or follow commands, uses a litterbox and spends 97% of her time curled up under a blankie. Sort of useless as a dog but nonetheless, highly decorative and totally endearing.”

To be in touch or send a picture of your beast, emal to ‘[email protected]’.