This Isn’t Even the Worst of It

I went on vacation for the past two weeks. I always promise myself that I won’t gorge on food like a pig during vacation, and I let myself down every time because I always want to try the local delicacies and I normally can’t find the time to work out, so it’s a double whammy.

When I go home, I know that I’ll have to go through austerity measures so that extra fat doesn’t find its way to my stomach area.

I know that this is inevitable, but I’m willing to pay the price.

I’m under no grand illusion, and I’m not deluded into thinking that I can eat pastries, desserts, creamy sauces, and consume sugary cocktails while not seeing the results on my body, but it’s fun to cheat on my diet occasionally.

I don’t live in a bubble, though… I know that the pleasure comes at a cost.

During the second half of 2020 and all of 2021, people didn’t seem to care about paying the cost. They just wanted to consume and get high on life.

In the luxury market, people with regular day jobs and no meaningful savings were out shopping for items that were marked with price tags for the rich and famous.

There was no regard for costs as lines of customers stood in front of shops and signed outrageous mortgage obligations, but the roosters have now come home to roost.

Nowhere can this pricked bubble be seen more than in America’s chief industry: construction.

The NAHB sentiment tumbled to its lowest level in ten years:

Courtesy:, Bloomberg

There’s no doubt that homebuyers have never felt worse, but I question the accuracy of their desperation. What I think is more telling and precise is the Homebuilder Confidence (the green line), and it is at one of its lowest readings of the past 38 years.

ZIRP messed everything up, normalizing a culture of believing money has no cost, and it created a valuation bubble.

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    The outlook could not be worse.

    The big difference between 2008 and today is not that subprime borrowers took on bad loans but that average American households paid prices that might not come back for 4-6 years.

    In the goldilocks economy of 2017-2019, valuations were based on a world of solid growth, low inflation, and plenty of innovation. The world of 2020 saw record bailouts and equities valued on dreams.

    Now, equities are starting to reflect a nightmare, and I’m getting extremely interested:

    Courtesy:, Bloomberg

    The next steps to finish off this period of a reset:

    1. MORE layoffs. How do you know a diet is over? When you see foodies skip meals and say NO to sweets
    2. Market selloffs on dismal earnings (Q1)
    3. Recession getting into the political discussion – Main Street feeling the pain

    We are mere months away from the most important bottom since 2009, and that is cause for a little smile but not a celebration.

    Best Regards,

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