"As the worst energy crisis in modern times unfolds across the United States, tens of millions of Americans are now experiencing energy poverty. Stressed supplies and a growing demand amid this summer’s blistering temperatures are leading to the highest prices in a generation. While real wages tumbled 3.6 percent over the past year, electricity prices shot up 16 percent, squeezing consumers. Unfortunately, things are about to get even worse for countless families in the nation, with the U.S. facing a looming crisis of utility shutoffs as a record-breaking number of households fall behind on their power bill payments. Businesses are suffering, too. And a series of shutdowns are set to occur as energy costs eat a larger share of business profits and consumer spending dramatically shrinks.
Natural gas is responsible for powering up nearly 40% of the US electric grid. On Tuesday, NatGas prices soared to the highest levels since 2008. Since June 2020, natural gas is up a staggering 525%. Meanwhile, electricity continues to rise to a blistering 30% year on year. Consequently, more and more people are scrambling to keep up with the rising costs. That’s why utility shutoffs have become more common all around the nation, with lower-income households now thousands of dollars behind on their power bills.
Several power companies reported a surge in non-payment customers. In California, PG&E Corp revealed that there had been a 40% spike in the number of residential customers behind on payments since February 2020. In New Jersey, the Public Service Enterprise Group exposed that the number of customers at least 90 days late has risen 30% since March. Prices for natural gas have been soaring worldwide following the Ukraine crisis. Russia is a major supplier of natural gas to Europe, but the Kremlin decided to retaliate against western sanctions by halting plans to open a key new pipeline, and disrupting Russian exports to Europe. In response, the U.S. government boosted gas exports to European allies, constraining domestic supply and raising prices at home.
The compounding effect of soaring energy bills, rising costs and rapidly declining consumer purchasing power is leading businesses all around Europe to face financial hardships. The U.S. is likely to see a massive wave of business shutdowns as well over the next few months. In fact, Epiq data shows that bankruptcy filings have started to tick back up again. The total number of new commercial and consumer bankruptcies filed in July grew 33.5% over the month prior, according to Epiq, with consumer filings increasing by 34% and commercial cases jumping by 26%.
For their part, U.S. consumers are financially tapped out. They've already maxed out credit cards, depleted savings, and have seen wage gains wiped out due to higher prices of virtually everything. Now, they’re at risk of losing power and set to face another dark winter. The next few months are going to be exceedingly difficult. Things are already starting to get really crazy out there, and global events are going to accelerate even more once the summer is over."
"We get warning after warning about the banks. Now banks are closing accounts for no reason at all. One of the subscribers sent me a letter where all the bank accounts that he has are being closed for no reason."
"Spiral galaxy NGC 4651 is a mere 35 million light-years distant, toward the well-groomed constellation Coma Berenices. About 50 thousand light-years across, this galaxy is seen to have a faint umbrella-shaped structure (right) that seems to extend some 50 thousand light-years farther, beyond the bright galactic disk. The giant cosmic umbrella is now known to be composed of tidal star streams. The streams themselves are extensive trails of stars gravitationally stripped from a smaller satellite galaxy that was eventually torn apart.
Recent work by a remarkable collaboration of amateur and professional astronomers to image faint structures around bright galaxies suggests that even in nearby galaxies, such tidal star streams are common. The result is predicted by models of galaxy formation, including the formation of our Milky Way."
“ Are we truly alone With our physics and myths, The stars no more Than glittering dust, With no one there To hear our choral odes?”
“This is the ultimate question, the only question, asked here by the Northern Irish poet Derek Mahon. It is a poem of exile, from the ancient familiar, from the sustaining myth of rootedness, of centrality. A poem that the naturalist can relate to, we pilgrims of infinite spaces, of the overarching blank pages on which we write our own stories, our own scriptures, having none of divine pedigree.
Yes, we feel the ache of exile, we who grew up with the sustaining myths of immortality only to see them stripped away by the needy hands of fact. We scribble our choral odes. Who listens? We speak to each other. Is that enough? Having left the home we grew up in, we make do with where we find ourselves, gathering to ourselves the glittering dust of the here and now.
Are we truly alone? Mahon again:
“If so, we can start To ignore the silence Of infinite space And concentrate instead on the infinity Under our very noses - The cry at the heart Of the artichoke, The gaiety of atoms.”
Better to leave the blank page blank than fill it with sentimental hankerings for home, with those prayers of our childhood we repeated over and over until they became a hard, fast crust on the page. Incline our ear instead to the faint cry that issues from the world under our very noses, from there, the tomato plant on the window sill, the ink-dark crow that paces the grass beyond the panes, the clouds that heap on the horizon - the dizzy, ditzy dance of atoms and the glitterings of stars.”
"If man were relieved of all superstition, and all prejudice, and had replaced these with a keen sensitivity to his real environment, and moreover had achieved a level of communication so simplified that one syllable could express his every thought, then he would have achieved the level of intelligence already achieved by his dog."
"I never really thought that I'd spend as much time in airports as I do. I don't know why. I always wanted to be famous and that would mean lots of travel. But I'm not famous, yet I do see more than my share of airports. I love them and I hate them. I love them because of the people I get to watch. But they are also the same reason why I hate airports. It all comes down to "hello" and "goodbye." I must have mentioned this a few times while writing my stories for you.
I have great difficulties with saying goodbye. Even as I write this I am experiencing that pounding sensation in my heart. If I am watching such a scene in a movie I am affected so much that I need to sit up and take a few deep breaths. So when faced with a challenge in my life I have been known to go to our local airport and watch people say goodbye. I figure nothing that is happening to me at the time could be as bad as having to say goodbye. Watching people cling to each other, crying, and holding each other in that last embrace makes me appreciate what I have even more. Seeing them finally pull apart, extending their arms until the tips of their fingers are the last to let go, is an image that stays forefront in my mind throughout the day.
On one of my recent business trips, when I arrived at the counter to check in, the woman said, "How are you today?" I replied, "I am missing my wife already and I haven't even said goodbye." She then looked at my ticket and began to ask, "How long will you... Oh, my God. You will only be gone three days!" We all laughed. My problem was I still had to say goodbye. But I learn from goodbye moments, too.
Recently I overheard a father and daughter in their last moments together. They had announced her departure and standing near the security gate, they hugged and he said, "I love you. I wish you enough." She in turn said, "Daddy, our life together has been more than enough. Your love is all I ever needed. I wish you enough, too, Daddy." They kissed and she left. He walked over toward the window where I was seated. Standing there I could see he wanted and needed to cry. I tried not to intrude on his privacy, but he welcomed me in by asking, "Did you ever say goodbye to someone knowing it would be forever?" "Yes, I have," I replied. Saying that brought back memories I had of expressing my love and appreciation for all my Dad had done for me. Recognizing that his days were limited, I took the time to tell him face to face how much he meant to me. So I knew what this man was experiencing.
"Forgive me for asking, but why is this a forever goodbye?" I asked. "I am old and she lives much too far away. I have challenges ahead and the reality is, the next trip back would be for my funeral," he said. "When you were saying goodbye I heard you say, 'I wish you enough.' May I ask what that means?" He began to smile. "That's a wish that has been handed down from other generations. My parents used to say it to everyone." He paused for a moment and looking up as if trying to remember it in detail, he smiled even more. "When we said 'I wish you enough,' we were wanting the other person to have a life filled with just enough good things to sustain them," he continued and then turning toward me he shared the following as if he were reciting it from memory...
"I wish you enough sun to keep your attitude bright.
I wish you enough rain to appreciate the sun more. I wish you enough happiness to keep your spirit alive. I wish you enough pain so that the smallest joys in life appear much bigger. I wish you enough gain to satisfy your wanting. I wish you enough loss to appreciate all that you possess. I wish enough "Hello's" to get you through the final "Goodbye."
Buenos Aires, Argentina - "Jerome Hayden Powell took just 8 minutes to deliver his remarks at the Fed’s colloquium in Jackson Hole on Friday, one of the shortest speeches there on record. Word for word, these may well have been the most expensive utterances of Mr. Powell’s career thus far. The key passage: “There will very likely be some softening of labor market conditions, while higher interest rates, slower growth, and softer labor market conditions will bring down inflation. They will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation.”
On hearing the words “slow,” “soft” and “pain,” investors promptly began panicking…Fox News called the chairman’s remarks a “sobering prediction.” “The Stock Market Finally Heard Powell’s Message Loud and Clear,” came the headline in Barron’s. “It Wasn’t Pretty.”
Bloomberg, meanwhile, ran with the billionaire angle..."Powell’s 8-Minute Speech Erases $78 Billion From Richest Americans." This last story went on to relay, with ill-disguised glee, how Elon Musk’s paper wealth fell by $5.5 billion on the session... Jeff Bezos lost $6.8 billion... and messrs Buffet and Gates lost $2.7 and $2.2 billion, respectively. Our guess is that the above-named gentlemen will not be missing a steak dinner anytime soon. So let’s return to the realm of the every-investor.
By the close of the session, the Dow Jones Industrial Average was down 1,008 points (3%)... the S&P 500 was lower by 147 points (3.4%)... and the Nasdaq was off by 497 points (almost 4%). Ouch!
Between the Lines: Mr. Powell, by all accounts an affable fellow with an undeniably solid sartorial sense, might have nonetheless taken a few extra seconds to expand upon his pithy remarks, if only to reduce their cost per word. Now, it goes without saying that nobody asked us here at Bonner Private Research for any input. (Probably a wise move.) Even so, in the spirit of clarity and honesty due the long-suffering American worker, we offer some unsolicited editorial suggestions just the same.
To the “some softening of labor market conditions” line, for example, Mr. Powell might have added, “which will disproportionately impact middle and low income Americans, many of whom have been forced to take second and/or part time jobs to make ends meet. And here, I’ll level with you a bit...
[Pause for effect]
You see, behind the ‘528 thousand jobs added in July’ headline, some 385 thousand of those fell into the ‘second’ or ‘part time’ designation. Hardly a sign of a robust economy. In fact, the labor force participation rate is back to where it was in April... of 1977! Moreover, adjusted for inflation - which I’ll come back to in a second - workers’ real wages are actually going backwards... so no matter how many extra jobs the common laborer or blue collar worker takes on, he’s unlikely to find enough hours in the day to keep his head above water. Okay, moving on...”
Here Mr. Powell might have paused once more, letting the gravity of his words sink into the collective consciousness of a nation already deep in recession. A prolonged, steely-eyed gaze over the distant mountains ought to add some faux pathos to his performance.
High on the Hog: Onto the “some pain to households and businesses” line, here Mr Powell might have elaborated a little further, too... “Of course, such pain won’t be felt by the billionaires you read about in the newspapers. Messrs Musk, Bezos, Gates, et al. are doing just fine. Matter of fact, thanks to our easy money policies at the Federal Reserve - and here I give a special shout out to my dear partners in cri... ahem, ‘colleagues,’ Janet, Benny and Al - the billionaire class has never had it so good in this country.
Able to borrow cheap money at ultra low, even negative rates, meant cash in their corporate coffers even as working and middle class families were mostly treading water. Throw in stock buybacks and no end of handouts, corporate subsidies, green initiatives and various other state-sponsored loopholes and shenanigans, which enjoy largely bipartisan support from our friends over in congress, and the rich have lived plenty high on the Fed’s hog, thank you very much. Sadly, nothing in this world is free, not even the Fed’s funny money. Somehow, some day, someone has to pay. Which brings me back to everyday, working Americans...”
At this point, Mr. Powell might have rolled up his sleeves, as politicians sometimes do, to affect some solidarity with the folks on the factory floor. To the “unfortunate cost of reducing inflation,” the head of the world’s most powerful central banking system might have appended “that we, as central bankers who flatly refused to see what was obvious to any non-wonk in the land, had a heavy hand in causing. You’ll recall we assured you there was nothing to be concerned over here, that inflation, if we ever did manage to conjure such a thing, would only be ‘transitory.’ Well, as I said before, the word ‘transitory’ means different things to different people. So that ought to be the end of that. And now, as you can see from my rolled-up sleeves, we now have the matter firmly in hand going forward. You can, as always, trust us to guide the ship from here on out.
[Final pause]
Lastly, I should mention the good and, it must be said, rather handsome gentlemen over at Bonner Private Research, who sent over some notes regarding my prepared remarks today. They tell me they’ve got a newsletter on Substack you can sign up for that will help you make sense of anything my colleagues and I say from this podium going forward. I’ll see you all at the bar afterwards for cocktails and hors d'oeuvres. Good day.”
"The first symptom of the process of our killing our dreams is the lack of time. The busiest people I have known in my life always have time enough to do everything. Those who do nothing are always tired and pay no attention to the little amount of work they are required to do. They complain constantly that the day is too short. The truth is, they are afraid to fight the Good Fight.
The second symptom of the death of our dreams lies in our certainties. Because we don’t want to see life as a grand adventure, we begin to think of ourselves as wise and fair and correct in asking so little of life. We look beyond the walls of our day-to-day existence, and we hear the sound of lances breaking, we smell the dust and the sweat, and we see the great defeats and the fire in the eyes of the warriors. But we never see the delight, the immense delight in the hearts of those who are engaged in the battle. For them, neither victory nor defeat is important; what’s important is only that they are fighting the Good Fight.
And, finally, the third symptom of the passing of our dreams is peace. Life becomes a Sunday afternoon; we ask for nothing grand, and we cease to demand anything more than we are willing to give. In that state, we think of ourselves as being mature; we put aside the fantasies of our youth, and we seek personal and professional achievement. We are surprised when people our age say that they still want this or that out of life. But really, deep in our hearts, we know that what has happened is that we have renounced the battle for our dreams – we have refused to fight the Good Fight.
When we renounce our dreams and find peace, we go through a short period of tranquility. But the dead dreams begin to rot within us and to infect our entire being. We become cruel to those around us, and then we begin to direct this cruelty against ourselves. That’s when illnesses and psychoses arise. What we sought to avoid in combat – disappointment and defeat – come upon us because of our cowardice. And one day, the dead, spoiled dreams make it difficult to breathe, and we actually seek death. It’s death that frees us from our certainties, from our work, and from that terrible peace of our Sunday afternoons."
"When a bull is being lead to the slaughter, it still hopes to break loose and trample its butchers. Other bulls have not been able to pass on the knowledge that this never happens and that from the slaughterhouse there is no way back to the herd. But in human society there is a continuous exchange of experience. I have never heard of a man who broke away and fled while being led to his execution. It is even thought to be a special form of courage if a man about to be executed refuses to be blindfolded and dies with his eyes open. But I would rather have the bull with his blind rage, the stubborn beast who doesn't weigh his chances of survival with the prudent dull-wittedness of man, and doesn't know the despicable feeling of despair."
“Believe me, I know all about it. I know the stress. I know the frustration. I know the temptations of time and space. We worked this out ahead of time. They're part of the plan. We knew this stuff might happen. Actually, you insisted they be triggered whenever you were ready to begin thinking thoughts you've never thought before. New thinking is always the answer.”
“I recently returned from two weeks of ‘high level’ meetings with a group of Bankers [this is code for two weeks of subsidized debauchery with bankers] in Rome. As I sat at my desk, I was hoping to motivate myself to pursue a more chaste and pure existence. Unfortunately the Polar Vortex experienced by North America drained me of my good intentions. The bone chilling cold once again had me reaching for my trusty bottle of Jack Daniels for warmth and inspiration. My time in Rome had not been completely ‘wasted’, so to speak. I had secured a contract from the European Central Bank [ECB] to research the topic of Derivatives. I was to present my findings at the upcoming World Economic Forum in Davos later that month.
One Quadrillion Dollars: Too Big to Understand: Dear Reader, please resist your natural instinct to click away from this commentary at the mere mention of the word ‘Derivatives’. I am acutely aware of the boredom and befuddlement that this word instills in you. At this point I would simply remind you that the derivatives market is estimated to exceed one QUADRILLION dollars. [This incredibly large number is actually an estimated size of the derivatives marketplace]. (In addition, unfunded liabilities, like medical care and pensions, are at least $300 trillion globally. If we add gross derivatives of $1.5 quadrillion, which are likely to turn into real debt as counterparties fail, the total debt and liabilities are above $2 QUADRILLION.Source - CP) Despite the fact the derivatives market eclipses the market capitalization of the NYSE by an exponential factor, it is not discussed, reported or tracked because it is simply too complicated and opaque. Warren Buffet’s, comment about ‘weapons of mass financial destruction’ seem to be the beginning and end of any discussion on the topic.
Derivatives are a parasitic financial instrument: For those of you who are unschooled on the topic of derivatives, allow me to explain. Derivatives are abstract financial instruments, which, like parasites, can attach themselves to all manner of stocks, bonds, mortgages, commodity, debt obligations, currency exchange, interest rate fluctuations… in short, anything. Derivatives exist in the ‘twilight zone’ of the banking industry. Like black holes, their presence and massive influence are acknowledged yet the true influence on the global economy of this quadrillion dollar ‘event horizon’ is only theoretical. The near catastrophic disasters at Barings, JP Morgan and AIG are small examples of their destructive powers. However I will offer you Investorpedia’s more clinical definition. “A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties.”
You got to know when to hold ‘em, know when to fold ‘em, {Kenny Rogers}: One might think of derivatives as a random game of online poker: you don’t know who your opponents are [your counterparty], you do not know if you will be paid [counterparty risk], you do not know if the game is legitimate, [lack of regulation], and your opponents are probably able to see what cards you are holding, [market domination by large banks]. As well, you are making bets that in many instances neither you nor your opponents fully grasp [complexity of the market]. With each wager you are potentially risking not only your current assets, but your future assets as well. [Leverage]. In some cases you do not know how much you are betting. Imagine as well, that you play this game every day with trillions of dollars that you do not have. This is the global derivatives market.
It is all Greek to me: Alternately, as derivatives are often created as a form of insurance, think of them as an insurance policy in which you:
• Do not know the name, address or any contact information relating to your insurer.
• Do not know if your insurer has the resources to pay a claim.
• Do not understand the insurance contract as it is written in Greek.
• Must rely on a shadowy third party [ISDA] to decide what constitutes a claim. [Credit event]
• Do not know whether your insurer is itself vulnerable to the particular risk you have contracted with it to insure.
His moral lassitude allowed him to excel: Dear Reader, I digress, let me return to my narrative. The aforementioned lucrative contract was secured by two key factors. The first factor was my friendship with Gustavo Laframboise-Pierre, the European Central Bank’s [ECB] Global Director of Statistical Creation. My relationship with such an esteemed member of the ECB traced its roots back to Gustavo’s days as a bookie for Wall Street’s elite. I referred so much business to him we became very good friends. His station in life took a remarkable turn when a senior member of the ECB, while in New York on a ‘fact finding mission’ [this is code for visiting his favorite escort] made an outrageously large and incorrect wager on the outcome of the 2010 World Cup.
(Perhaps unsurprisingly, the term ‘derivative’ is commonly used in sports betting!) The only way the debt could be settled was for the banker to offer Gustavo a highly paid sinecure at the ECB. Gustavo became the Global Director of Statistical Creation with the responsibility of making up statistics to support whatever fantastical and deranged policies Central Banks around the world were initiating. Remarkably Gustavo’s aptitude for numbers, coupled with his moral lassitude allowed him to excel at his job. It was Gustavo who invented the term ‘Quantitative Easing’ as a benign euphemism for runaway money printing.
Where ignorance is bliss, ‘tis folly to be wise’: The second factor that secured the contract for me was a chance remark I made as Gustavo and I enjoyed a ‘working lunch’, with several senior executives who represented many of the world’s largest banks. The working lunch was held at Rome’s exclusive Blue Moon Gentleman’s Club. As the featured dancer left the stage I happened to mention to the assorted luminaries that I had read an article on the subject of derivatives. The bankers looked at me with something akin to awe and reverence. Gustavo whispered to me that the topic of derivatives had been discussed in a recent conference call by the world’s bankers. The conclusion reached at that time was that derivatives were too boring and too complicated for bankers to grasp. Despite JP Morgan’s very public, expensive and monumentally stupid 5 billon dollar derivatives trading loss bankers still choose to remain cocooned in a ‘Cloak of Ignorance’ as it relates to derivatives. Thomas Gray’s lament that ‘where ignorance is bliss, ’tis folly to be wise’ could easily be the mission statement of the global banking industry.
I had read a complete article, I was a ‘de facto expert’: Dear reader, I am not being rude and offensive in my remarks about JP Morgan. Surely you would agree with me that any large bank that loses $5 billion in derivatives trading is ignorant of the properties and risks of derivatives? The fact that I had actually read a complete article on the subject made me a de facto expert on the topic. Gustavo, in an act of kindness, seized the opportunity on my behalf and pressed his colleagues to retain me to research the topic and make a presentation at the upcoming World Economic Forum in Davos. Thus I found myself preparing to dazzle the world’s financial elite with my insights into the risks and opportunities presented by the global derivatives market. In a rush to complete the deal before the next dancer took the stage it was agreed that I would receive the standard banker’s honorarium of $5,000/hour up to a maximum of ‘whatever it takes’.
At $5,000/hr., you would surely not expect me to be brief: I sat at my desk, sipping ‘Gentleman Jack‘ while I looked out at the bleak weather that made Brooklyn so depressing in the winter. My TV was tuned to CNBC, as I waited for Wall Street to open. I put my crack pipe in its case. Dear reader like many of you [especially those of you who work in the banking industry], I have learned all too well, the dangers of mixing crack cocaine with whiskey on an empty stomach. [Have we not all indulged, to our regret, that particular venial sin at least once?] I collected my thoughts and began to write my lengthy tome on the derivatives market. Dear reader at $5,000/hr., you would surely not expect me to be brief.
Lions and Tigers and Bears [and derivatives] Oh My!: I do not want to frighten you. However I will share with you some facts about derivatives that will have you reacting as nervously as Dorothy did in the Wizard of OZ when confronted with the thought of Lions and Tigers and Bears. ‘Derivatives, Oh My’, will I suspect be the words that escape your lips.
• Size of the derivatives market: 1.5 – 2.4 QUADRILLION dollars
• Who regulates the Derivatives market? LOL, Regulation is a ‘work in progress’ dominated by the big banks.
How dangerous are derivatives? They almost destroyed the world’s largest insurance company, AIG, as well as the global economy. Seriously, you don’t remember? Just Google the words AIG and collapse. Alternately you might call Jamie Dimon at JP Morgan and ask him if Derivatives are dangerous. Have recent regulatory changes made the world economy less likely to implode from a derivative fuelled explosion? Actually as one might expect, thanks to regulatory enhancements that had to run the gauntlet of bank lobbyists prior to their approval, the world’s economy is in more danger than ever from a derivatives inspired meltdown.
‘Duck Dynasty’ and ‘Real Housewives’ to the rescue: How much attention does the Main Street pay to the world’s largest and riskiest casino? [AKA: the Derivatives market]. If one were to Google the word derivatives, one will get 34 million ‘hits’. Alternately, if one does a similar search for the words stocks bonds and markets one will get 400 million ‘hits’. The 34 million ‘hits’ generated by a Google search of the word derivatives compares unfavorably with the 37 million ‘hits’ generated by a search of the term ‘Real Housewives of Atlanta’, the 209 million ‘hits’ generated by a search of the term ‘Duck Dynasty’ or the 713 million ‘hits’ generated by searching the word ‘Sex’. One must conclude that only when derivatives are discussed by one of the ‘Real Housewives of Atlanta’ posing nude in bed with one of the cast members of ‘Duck Dynasty’ will derivatives receive the attention they deserve.
Reality bites: Derivatives can only be discussed as ‘Fake News’: Where can one find insights and coverage of the Derivatives Market in the mainstream media? Is Fox News or CNN my best choice? Sadly Dear reader your best choice would have been The Daily Show with Jon Stewart. Despite the calamitous risk and obvious importance of this topic only Mr. Stewart and his team dared to share information with the general public. Given the outlandish and frightening risks derivatives constitute to the Global Economy, perhaps Mr. Stewart was correct that it can only be discussed in the ‘Fake News’ format.
Derivatives: better suited for Ripley’s Believe it or not than the Wall Street Journal: How bizarre is the derivatives market? How is the concept of money for nothing propagated by the derivatives market? What is the difference between a chump and a champion in the derivatives market? I will leave it to Shah Gilani in his excellent post in “Wall Street: Insights and Indictments“ to explain. Suffice to say that one is able to buy insurance in the derivatives market. One can then cause the insured event to occur by collaborating with a third party. All that remains is to collect the insurance proceeds. [To be clear the proceeds are usually in the tens of millions of dollars.] The derivatives market makes the Ponzi-like money printing of the Central banks look like ‘Amateur Hour’.
Who needs ‘Crack’? Dear reader, usually I needed a little help from my friend Mr. Crack to feel as paranoid and euphoric as I did at this moment. Paranoid, because it was clear to me that the derivatives market was truly a weapon of mass financial destruction. Euphoric because I knew that my research would make my ‘Derivatives’ presentation at the World Economic Forum a groundbreaking ‘tour de force’ that would vault me to the forefront of ‘talking heads’ that pass for experts on mainstream media. Fame, fortune, a book deal and perhaps that elusive Nobel Prize would surely follow. My twenty minutes of painstaking research, had made me one of the world’s foremost experts on this complex subject. [BTW Dear Reader by reaching this point in my commentary, you surely now know more about derivatives than most bankers and traders on Wall Street. You should be quite pleased.]
David, you are an imbecile: I decided to reach out to my pal Gustavo and share some of my findings. I knew that it was 3:30 in the afternoon in Paris so I would be able to catch Gustavo just as he arrived for another day of work. “Gustavo”, I intoned, breathless with excitement. “I have uncovered some startling, controversial, and frightening information about derivatives. The luminaries and leading lights who attend my presentation in Davos will be utterly gobsmacked by my revelations. The media will undoubtedly ensure that my findings go viral. The topic of derivatives will no longer exist only in the dark shadows of the banking industry. The danger that derivatives pose to the global economy will permeate the consciousness of Main Street.” Gustavo sighed, “David, I do not know if you are stupid or naïve. Every September when you bet $1,000 that the perennially atrocious Toronto Maple Leafs will win the Stanley Cup, I assumed you were simply ingenuous. Your comments today have convinced me that you are an imbecile. Let me assure you that those will not be the findings that you present at the World Economic Forum. Rather you will inform the world that derivatives are a financial instrument that is being used by brilliant and prudent financial professionals to mitigate risk and make the world a safer place.”
The ‘Truth Will Out’: “Gustavo”, I groaned, “that would be a lie. I cannot in good conscience, sacrifice my integrity, my honor, my core beliefs and my good name simply to placate Wall Street and the Central Banks. I have a responsibility to my readers on Main Street to inform them, to warn them, to prepare them for the likely financial chaos that derivatives will cause”. “Gustavo”, I said with iron willed determination, “the Truth Will Out”. “David”, Gustavo snarled, “If you change the tenor of your presentation and indicate that derivatives are the most benign form of financial instrument, somewhat akin to Treasury bills, we will double your fee”.
Move along nothing to see here: Dear Reader, in summary let me say that derivatives are the most benign form of financial instrument, somewhat akin to treasury bills. Gustavo’s immutable logic and persuasive argument was instrumental in helping me reach the correct conclusion regarding the risks to the Global economy posed by derivatives. So Dear Reader, move along, there is nothing to see here.”
"In 2008, we experienced a nightmarish financial crisis that was felt in every corner of the globe. Is such an event about to happen again? On Friday, the Dow Jones Industrial Average plunged 1,008 points as panic swept through Wall Street in the aftermath of Jerome Powell’s dramatic speech in Wyoming. Powell made it exceedingly clear that interest rates are going to continue to go up, and that deeply alarmed investors. Some very vocal influencers in the financial community had been anticipating that the interest rate hikes would be ending soon, but now Powell has completely dashed those hopes. Wall Street is going to have to finally face reality in the weeks ahead, and it isn’t going to be pretty.
When I heard that the Dow had fallen 1,008 points on Friday, the last two digits immediately stood out to me. We all remember what happened the last time a year ended in “08”. Could this be a sign that another 2008 is coming? Before you dismiss such a notion, there are other times when a stock market crash has seemed to have been a sign of things to come.
For example, on September 29th, 2008 the entire world was stunned when the Dow Jones Industrial Average dropped 777 points. That was a new all-time record, and fear swept through Wall Street like wildfire. The following comes from a CBS News report that was published in the immediate aftermath of that market crash…"Wall Street watched Washington with shock and fear as the bailout package flamed out on Capital Hill.
And as that $700 billion financial rescue plan went down, the Dow went down like a sub, hurtling the Dow Jones industrials down nearly 780 points in its largest one-day point drop ever, reports CBS News correspondent Anthony Mason. “Nobody could believe it,” said Ted Weisberg of Seaport Securities. “The fact that it did not get done is just mind-boggling.” The result on Wall Street was a history-making 777-point nosedive. The Nasdaq plunged almost 10 percent."
Many thought that it was rather odd that the stock market would fall 777 points just as a 7 year Shemitah cycle was ending and a new 7 year Shemitah cycle was beginning. Rosh Hashanah started on the evening of September 29th, 2008, and all throughout history we have seen really big things happen on or around the times of major Biblical festivals.
Ultimately, the weeks following September 29th, 2008 were some of the most difficult that we have ever seen for Wall Street. A great financial crisis shook the entire planet, and the U.S. economy plunged into what would become known as “the Great Recession”. 7 years later, there was another stock market crash in 2015. It was immensely painful at the time, but not a lot of people remember it today.
Now another 7 years have passed, and it appears that we are on the verge of yet another major panic on Wall Street. Interestingly, another cycle seems to be repeating as well. As I discussed the other day, this is the 14th anniversary of the housing crash of 2008. But what most people don’t remember is that there was another housing crash 14 years before that in 1994. And if you go back 14 years before that, you will find that the U.S. housing market was crashing in 1980. Now the U.S. housing market is crashing again, and this one could turn out to be the most painful of them all.
If the Federal Reserve would just stop raising interest rates, we may have had a shot at avoiding a complete collapse of the housing bubble. But that isn’t going to happen, and Jerome Powell made that exceptionally clear on Friday morning…"In a keynote speech at the Federal Reserve’s annual Jackson Hole Economic Symposium Friday morning, Powell said that the path to reducing inflation would not be quick or easy, adding that the task, “requires using our tools forcefully to bring demand and supply into better balance.”
“Using our tools forcefully”? That doesn’t sound good at all. And during his speech he actually seemed to promise that “some pain” would be coming for U.S. households and U.S. businesses…“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” he said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
Even with four consecutive interest rate hikes, including two back-to-back 75-basis-point increases, Powell stressed that the Fed is not in a place to “stop or pause” - an unwelcome sign for investors who were predicting a rate cut next year. So more interest rate hikes are coming. Will it be a half a percentage point next month or will it be three-quarters of a point once again? Only time will tell, but either choice will accelerate the collapse of the housing market and will bring even more pain for Wall Street.
Something that I will be watching very closely is the derivatives market. As Alasdair Macleod recently explained, the derivatives bubble has expanded to a size that is almost unimaginable…"By far the largest problem in a period of credit contraction is to be found in over-the-counter derivatives. These are unlisted contractual agreements between counterparties, including commodity contracts, credit default swaps, equity linked contracts, foreign exchange derivatives, and interest rate derivatives. According to the BIS’s database, in December 2021 the notional amounts outstanding of all contracts was $610 trillion. These positions are the total of seventy dealers’ returns in twelve jurisdictions, capturing an estimated 94% of the total covered in the BIS’s triannual survey, suggesting that the true total outstanding is closer to $650 trillion."
Once this derivatives bubble finally bursts, it will be an event that will be absolutely cataclysmic for the global financial system. I have been specifically warning about the dangers posed by the derivatives bubble for many years, and it is only a matter of time before it comes crashing down.
Unfortunately, what Jerome Powell and his minions at the Fed are doing threatens to greatly destabilize financial markets. Wall Street is not prepared for an interest rate shock, and I believe that Fed officials are making a tragic policy error."
"Once this derivatives bubble finally bursts, it will be an event that will be absolutely cataclysmic for the global financial system." I'm sorry, Michael, but the true size of derivatives is not $650 trillion, it's actually $2.5 QUADRILLION, an incomprehensible number. "Absolutely cataclysmic?" As a video metaphor this is a fairly accurate representation of how it will seem for the entire world economy when the derivatives bubble-bursting wave hits, and it will, soon...
Full screen recommended.
And why will this happen? Because the psychopaths, in their infinite greed and insanity, have generated all these derivative contracts because they get paid nice fat commissions on every one. The fatal element of all this is that they bought them all on margin, never paying full price, which is why we see them frantically pumping up the stock market in a futile attempt to "pump or die" to avoid margin calls. A drop in stock values will trigger margin calls which none can pay, resulting in an unavoidable, absolutely incredible tsunami of bankruptcies, totally collapsing literally everything.
Don't believe me, or simply believe what they tell you. Question everything, do your own research, gather the best factual information available, and draw your own informed conclusions, and use that information to prepare for what's coming as best you can. God help us all... Believe what you need to, but know why...
"Massive Price Increases At Kroger! Not Good! What's Next!?"
"In today's vlog we are at Kroger, and are noticing massive price increases! We are here to check out skyrocketing prices, and a lot of empty shelves! It's getting rough out here as stores seem to be struggling with getting products!"
“This shock wave plows through space at over 500,000 kilometers per hour. Moving toward to bottom of this beautifully detailed color composite, the thin, braided filaments are actually long ripples in a sheet of glowing gas seen almost edge on. Cataloged as NGC 2736, its narrow appearance suggests its popular name, the Pencil Nebula.
About 5 light-years long and a mere 800 light-years away, the Pencil Nebula is only a small part of the Vela supernova remnant. The Vela remnant itself is around 100 light-years in diameter and is the expanding debris cloud of a star that was seen to explode about 11,000 years ago. Initially, the shock wave was moving at millions of kilometers per hour but has slowed considerably, sweeping up surrounding interstellar gas.”
"There are some oddities in the perspective with which we see the world. The fact that we live at the bottom of a deep gravity well, on the surface of a gas covered planet going around a nuclear fireball 90 million miles away and think this to be normal is obviously some indication of how skewed our perspective tends to be."
"There is a four-line poem by Yeats, called "Gratitude to the Unknown Instructors":
"What they undertook to do They brought to pass; All things hang like a drop of dew Upon a blade of grass."
Like so many of the short poems of Yeats, it is hard to know what the poet had in mind, who exactly were the unknown instructors, and if unknown how could they instruct. But as I opened my volume of The Poems this morning, at random, as in the old days people opened the Bible and pointed a finger at a random passage seeking advice or instruction, this is the poem that presented itself. Unsuperstitious person that I am, it seemed somehow apropos, since outside the window, in a thick Irish mist, every blade of grass has its hanging drop.
Those pendant drops, the bejeweled porches of the spider webs, the rose petals cupping their glistening dew - all of that seems terribly important here, now, in the silent mist. There is not much good to say about getting old, but certainly one advantage of the gathering years is the falling away of ego and ambition, the felt need to be always busy, the exhausting practice of accumulation. Who were the instructors who tried to teach me the practice of simplicity when I was young - the poets and the saints, the buddhas who were content to sit beneath the bo tree while the rest of us scurried here and there? I scurried, and I'm not sorry I did, but I must have tucked their lessons into the back of my mind, a cache of wisdom to be opened at my leisure.
Whatever it was they sought to teach has come to pass. All things hang like a drop of dew upon a blade of grass."
"The Economy is a Train Wreck Coming From Every Direction"
"Things are coming at us in every direction. We are getting hit with high fuel prices. We cannot escape food inflation. Now our insurance and taxes are going to go sky high. When will it end?"
How the government is robbing Peter to bribe Paul...
by Bill Bonner
Poitou, France - “Sometimes I'll start a sentence and I don't even know where it's going. I just hope I find it along the way.” - White House Press Secretary Karine Jean Pierre. This morning, Bloomberg broadcast another painful performance by White House Press Secretary, Karine Jean-Pierre. Asked how the administration can square student loan forgiveness with its other fiscal goals, Ms. Jean-Pierre gave a rambling, incoherent response. The only complete sentence we could detect was this: "We do believe it will be fully paid because of the work this president has done with the economy."
Of course, it makes no sense. The president has done no ‘work’ with the economy at all. He has only burdened it with more costs, more regulations and more claptrap. Between the infrastructure, Ukraine aid, silicon chip and ‘green’ energy boondoggles, the Biden Bunch added almost $2 trillion in new spending. Debt forgiveness can only make inflation worse.
But it seems a little mean spirited for Bloomberg to show the video of Ms. Jean-Pierre; it is like laughing at old person running to the bathroom. She needs sympathy, not mockery. After all, she must be in some sort of program for people who are ‘differently abled’ or with ‘special needs.’ Besides, the real problem is not her, it’s that so many federal programs are inexplicable… except as schemes to rob the taxpayers.
How it “Works”: Scam them… tax them… rip them off… herewith a Dummies Guide for Ms. Jean-Pierre; here’s how it works: The long-suffering middle classes stand in line to give their support to politicians… and then get stabbed in the back by them. Not once… but over and over…
And after so many wounds, they still don’t understand how ‘the system’ works… how it is designed to separate them from their money. A subsidy to the solar hustlers… ‘canceling’ student debt to buy votes… a huge gift to one group of thugs in the Eurasian heartland so they can kill another group of thugs – and all the money has to come, yes, from ‘The People.’
The salt of the earth… the common foot soldier and Girl Friday; they are “The People.” They think they are in charge. They think the feds work for them. But their thoughts are as muddled and misshapen as Ms. Jean-Pierre’s sentences.
Meanwhile, the feds…send our sons and daughters to fight in stupid, pointless wars – Iraq, Afghanistan etc.…use their money to back corrupt regimes overseas and incompetent bureaucracies at home…lure them into debt with ultra-low mortgage rates, student loans and “Green” subsidies…and then pass an “Inflation Reduction Act” that actually forces them to pay even more for everything…But wait… we’re not finished…hit them with the ‘inflation tax’… lower their real wages… then, increase house prices so they can’t afford a roof over their heads.
The Fed’s Fiasco: The Fed lent money at such low rates that Wall Street firms were able to turn single family homes into an asset class. The builder made money. The realtor made money. The mortgage lender made money. And now a whole new intermediary was in the picture – making even more money off the middle class.
Families looking for a place to live often had to bid against billion-dollar corporations. Not surprisingly, the Wall Street firm won the auction; it was backed by the Fed’s money. And then, if there were capital gains to be made, Wall Street made them, not homeowners. Prices rose higher and higher, to the point where, in 2022 as in 2007, the typical family could no longer afford the typical house. And now… even the pros are pulling out of the single-family real estate market. And house prices are falling.
Here’s the latest. Bloomberg reports: "Blackstone Single-Family Landlord to Halt Home Purchases in 38 Cities." "Home Partners of America to press pause beginning Sept. Company cites home price growth, market demand, regulations." Another ‘rug pull’ by the Fed? No, this time they are tearing out all the carpets and the kitchen sink too!
Those who decided to rent rather than buy aren’t doing so well, either. Rents are still rising. CNN: "US rents hit a record high for the 17th month in a row." "The national median rent hit a new record high of $1,879 a month in July, up 12.3% from a year ago, according to Realtor.com. While rents have been hitting new records for nearly a year and a half, there are some early signs that the market may be starting to cool off: July marked the sixth-straight month of moderating growth, retreating from a 17% year-over-year rent increase in January."
What a beautiful flimflam – press down on the brow of labor a crown of ultra-low interest rates so they have to stretch to buy a house… and then crucify them with falling house prices!"
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Joel’s Note: Dear readers who are concerned the student debt jubilee effectively cancels $330 billion worth of student loans can relax. The debts are not being canceled. They’re being transferred… to you. Payment will come in the form of higher taxes, including decidedly non-“transitory” inflation (sometimes called the “sneaky tax.”)
Some economists have suggested the bill may add as much as 0.3% to the consumer price index, itself already tickling 40-year highs. Former economic advisor to president Obama, Jason Furman, was slightly less mathematical when he took to Twitter yesterday to explain: “Pouring roughly half [a] trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”
Your editor doesn’t claim such precise knowledge about future inflation as do the nation’s leading economists… but having grown up as the son of a fireman in Australia, we know what a rip-roaring bushfire looks like, and you don’t want to be near one when it gets out of control!"
