You Still Don’t Get it, Do You, Cathie?
While his handlers and spin doctors tell him to lick ice cream and pose on his bicycle, just like they told the violinists to keep playing on the Titanic, anyone with a real brain knows this ship is sinking.
This week, a social media company named Snap reported earnings. At its peak, on September 24th, 2021, just over a year ago, shares of the company traded for $83. Today, the price is $7.76/share, a wipeout of over 93%.
This is not a standalone case, and it exemplifies how delusionary investors were in the past two years, willing to pay nearly anything for a company just because it was growing.
Today, nobody cares about growth on Wall Street. Growth is risky, value is risky… only CASH is safe. Did you hear me? The world has gone from mocking cash to praising it.
The most crowded trade on Wall Street is LONG USD!
This past Friday, after they reported earnings, Snap shares plummeted by 28%. Wall Street, forward-looking as it is, sold off all the other ad companies as well.
Some of them are profitable companies with explosive growth, stellar business sheets, compelling advantages in their respective niches, and their valuations are attractive.
I texted my fund manager to see what he thought about one in particular and his reply was: “Nothing has changed. I am not buying ANYTHING.”
Wall Street is not able to wrap their heads around any bullish thesis, and I believe that they won’t go back to risk-on mode until the 10-year Treasury yield comes down below 3.00%, perhaps even 2.50%.
I’m saying that we’re already in a war because the pace at which the Federal Reserve and other central banks around the world have hiked has been war-like.
No one wants to own debt right now, and yields are rising at the fastest pace I’ve seen in my career. Only when the financial system nearly ended in 2008 have we seen such distaste for debt.
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The midterm elections happening next week are the glue that keeps this smoke screen from unraveling, but I’m telling you that when the elections are behind us, it will get real very fast because the whole political narrative will switch from ice cream to war.
Below, I want to show you crucial elements of this crisis we’re going through and how bad it really is.
The financial conditions in America are turning tighter more aggressively than at any other time after the gold standard ended:
This is a clear indication of how wrong the FED was on transitory inflation and the lack of real thinking among the FED governors who failed to see that people were spending too much because there was a feeling that the money spring would eternally produce more liquidity.
It appears like the markets are now truly realizing what we’ve been saying since February: we are NOT going to see a real pivot, only a pause.
The opinion is slowly becoming more and more of a consensus that rates are heading toward 5% and will remain high for years, which is a total revolution for many businesses that were only in existence thanks to easy-credit policies.
So, America, do you have a wartime president?
We will learn soon enough…
The trial period is over; this is the real deal.
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