Advancing Time: Looking Back, A 2018 Warning Of Markets Overdone

Advancing Time: Looking Back, A 2018 Warning Of Markets Overdone: While listening to a financial program recently I heard one of the participants mention and praise Fred Hickey, an analyst whom I was unfami...

Looking Back, A 2018 Warning Of Markets Overdone

While listening to a financial program recently I heard one of the participants mention and praise Fred Hickey, an analyst whom I was unfamiliar with. Upon researching this fella to get a feeling of his views, an interview he did years ago popped up. It appears that back in early 2018, Fred Hickey, a frequently cited expert on Bloomberg News and Barron's Round-table was more worried about the state of the financial markets than he had ever been. 

Hickey, known for publishing his extremely well-respected investment newsletter, The High-Tech Strategist, took the stand that asset prices were dangerously overvalued. Today, the same markets are much higher, in truth, they never really retrenched.

While his primary focus had been on analyzing Tech stocks, over the years he had expanded his research into macro trend analysis. This includes how central banks started increasingly intervening in world markets and distorting the price of money. Rather than taking this post as a criticism of Hickey, consider it solid proof that we have again witnessed the adage often attributed to the famous economist John Maynard Keynes:

    The market can remain irrational longer than you can remain solvent.

This saying is often cast out as a reminder that a person can be right but timing often determines our destiny. It also underscores why, capital preservation should be job one. The market will fail only when something breaks. It is only then that delusion and despair will overtake the optimist irresponsible central banks and the policies politicians continue to crank out. History indicates that efforts to postpone the day of reckoning only delay it. 

As  pointed out, Hickey, a lifelong expert in "all things technology" was railing against market trends as far back as 2018. Even then he concluded that gold (the "barbaric relic") had become the sanest asset to put one's capital. This was due to its safety factor and its current level of undervaluation. This is why Hickey was out warning about how we were in an everything bubble.    

His warning included how companies such as Tesla were doomed to fail. This argument held some truth but over the years, forces have pushed the boulder up the hill. Today markets are at insane levels and much higher than many of us thought possible. This is a time when it might be wise to remember trees, no matter how tall, do not grow to the sky. 

In a very recent video on Thoughtful Money, Sven Henrich of NorthmanTrader.com reached out with the message that he closed out all his longs this week and moved to cash. While he has been a bit spooked by recent market action, he makes it clear be is not all that bearish. Based on his charts, he is cautious. This is due to the fact we are experiencing the most distorted markets in history. Whether this is a result of too much liquidity or passive investments driven by computer trading is an issue of debate. 

The important thing is where the market goes from here. Having been bearish far longer than I ever wanted to be, every time I turn towards capitulating, I try to remember that two wrongs don't make a right. This is particularly true in economics. When the numbers don't work it is only a matter of time before reality hits hard and long. The idea that this time is different has throughout history proven untrue. Whether the market pullback that started a few days ago is a preamble to something greater has yet to be determined.

(Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)

Advancing Time: China's Massive Three Gorges Dam Again In Peril

Advancing Time: China's Massive Three Gorges Dam Again In Peril: China is again facing massive flooding. Some problems are built to last and won't go away. The massive Three Gorges Dam and flooding iss...

China's Massive Three Gorges Dam Again In Peril

China is again facing massive flooding. Some problems are built to last and won't go away. The massive Three Gorges Dam and flooding issues in China fall into this category. This is a disaster waiting to happen.

The two AdvancingTime articles below from 2020 give details and indicate the dam's failure. This is most likely a case of when not if. Both articles have had some parts deleted to make them shorter and easier to read.

China's Massive Three Gorges Dam Is In Peril  --- Sunday, July 19, 2020

Click On Image To Enlarge

Over the last month, most people have not paid much attention to the weather in China. This is because it is not something we dwell upon but it merits our attention since word has been leaking out that China's massive Three Gorges Dam is in peril. Most of us have little knowledge of this dam which is the world's largest and the implications if it does fail. Its failure would result in a massive loss of life and property. After record rainfall with more expected concern is rising as the flooding continues.

It is said about 400 million people live downstream of the dam and apparently no plans have been made for their evacuation. Here are a few facts about the dam. The Three Gorges Dam is around one and a half miles long and just over 600 feet tall. It is a hydroelectric gravity dam that spans the Yangtze River by the town of Sandouping, in Yiling District, Yichang, Hubei province, China. Construction was started in the 1990s and completed in 2006. Its failure would have catastrophic consequences and could kill around half a million people.

Vice Minister of Emergency Management Zheng Guoguang said on Monday that the Yangtze, Asia's longest river, and parts of its watershed have seen the second-highest rainfall since 1961 over the past six months. Residents in the Yangtze River basin in recent weeks have expressed concerns over the ability of the massive dam to handle more heavy rain, even though authorities have been releasing floodwater from the structure. If the dam does fail the province's capital Wuhan the epicenter of China's coronavirus outbreak would be hard hit.

Some people claim this whole "flooding thing" is deliberate and a conspiracy to wash away the evidence related to Covid-19. Really? That is a reach in my opinion. 

The following piece looks at all the problems that surfaced as the plan came together and leads us to believe a disaster may soon occur.
|News Tv 004|Cold people looked at The Three Gorges Dam, the process of making a Bomb

While this is not something I would normally write about but it does circle back to highlight how decisions are made in China and the quality of construction, or lack of it, that is widespread throughout the country. Because of its size, the failure of the Three Gorges Dam would have broad ramifications for China's Communist Party and its reputation.

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China's Massive Three Gorges Dam On Edge Of Failure  ---  Tuesday, July 28, 2020

The massive flooding taking place in China continues, for some reason, this story has been widely ignored by mainstream media. It is important because China's massive Three Gorges Dam is in peril. If the dam fails there will be a staggering loss of lives and property. The Three Gorges Dam is around one and a half miles long and just over 600 feet tall. About 400 million people live downstream of the dam and apparently, no plans have been made for their evacuation.

The failure of this dam, which is the largest in the world, would have catastrophic consequences. It is estimated such an event could result in around half a million people being killed. The Asia Times reported several days ago that Beijing has admitted that its 2.4-kilometer Three Gorges Dam spanning the Yangtze River in Hubei province “deformed slightly” after record flooding. The deformation occurred last Saturday when waters from western provinces including Sichuan and Chongqing along the upper reaches of the Yangtze River peaked. At this, point the biggest concern is that rain continues and more is expected.

China's Three Gorges Dam

The company that manages the dam noted that parts of the dam had “deformed slightly,” displacing some external structures. Seepage into the main outlet walls had also been reported throughout the 18 hours on Saturday and Sunday when water was discharged through its outlets. Wang Hao, a member of the Chinese Academy of Engineering and an authority on hydraulics who sits on the Yangtze River Administration Commission, has assured that the dam is sound enough to withstand the impact from floods twice the mass flow rate recorded on Saturday.

It should be noted that Wang’s remarks stoked a volley of mockery after he said the flooding could be a good thing as the dam would only become more rigid the longer it was steeped up to its top. 

All this circles back to highlight how decisions are made in China and the quality of construction, or lack of it, that is widespread throughout the country. Because of its size, the failure of the Three Gorges Dam would have broad ramifications for China's Communist Party and its reputation. To see a current video of the situation click on this link: https://www.youtube.com/watch?v=qKyvVWl3MgU

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

 

 

Advancing Time: Velocity Of Money Is No Longer A Huge Inflation Fa...

Advancing Time: Velocity Of Money Is No Longer A Huge Inflation Fa...: Let's talk about the velocity of money! The speed at which money flows through the economy is often tied to speculation about the future...

Velocity Of Money Is No Longer A Huge Inflation Factor

Let's talk about the velocity of money! The speed at which money flows through the economy is often tied to speculation about the future of inflation. It may be important, but it is no longer a big factor when it comes to inflation. We have entered a cost-push inflationary cycle and these tend to be self-feeding. This translates in to more inflation ahead.

Today, small businesses are suffering the most pain of cost increases since larger enterprises have a lot more ability to get cheap funding. More small businesses forced to close may result in stagflation in this economic cycle rather than deflation which is normally associated with downturns. This is a reason for concern on both the employment and inflationary front. Not only do small businesses employ a huge number of people but they generally resist raising prices due to close relationships with their patrons.

 

As for the velocity of money;

 

Velocity is the speed in combination with the direction of motion of an object. Velocity is a fundamental concept in the branch of classical mechanics that describes the motion of bodies.

The scalar absolute value (magnitude) of velocity is called speed.

The faster money moves through the economy is sometimes tied to demand in that John or Jo will take all their money on payday and spend it immediately if their demands are high. In such a situation, retailers and vendors will rush to replenish goods to refill shelves. During low demand, they will spend the money slowly over time and the vendor will pull from inventory rather than place new orders.

Please consider the possibility that what is considered a "slowing in the velocity of money" is rooted in where money or wealth is being placed. Another factor could be who holds the bulk of money in circulation. As inequality has grown and more wealth shifted into the hands of a few, the idea these few will park their wealth and money for long periods of time feeds into why velocity is falling. Then, please consider, that a shift in investor attitudes causing a shift away from intangible to more tangible investments could spark a surge in both velocity and inflation. 

Over time, changes in the way people handle transactions, such as using more or less charge cards or debit cards as well as the way financial institutions facilitate such transactions may affect how velocity is viewed. Still, how much the velocity of money affects inflation is difficult to assess. This leads us to the question of whether inflation is being driven by demand factors or simply increases in cost being passed along. 

Much of the inflation we have witnessed in recent years has been attributed to supply chain shock as well as a large increase in the money supply. Huge government deficits and spending as a result of Covid and efforts to get the economy moving post Covid have acerbated the situation. This brings up the question of what we should expect going forward. Demand-pull inflation, cost-push inflation, or if the economy continues to fall, stagflation. 

Mixed into this brew is the idea trade is good for all parties concerned, trade deficits, the value of fiat currencies, and tariffs. Several flaws regarding the idea that "free trade" is the answer to many of our problems have revealed themselves in recent years. In short, it is time to honestly look at the role of trade and why it should be considered a double-edged sword. While the idea behind trade has a great deal of merit it is often given far more credit for economic growth than it should. 

With government spending predicted to grow in coming years, and a continued debasement of fiat currencies, deflation is unlikely. No matter how those in the know or in charge of such policies seek to spin it, they can’t lead countries out of what appears to be persistent economic trends. While the rate of price inflation is easing, core inflation remains stubbornly high.

The problem is continued government spending. The Fed’s efforts to ease inflation and the easing rate of inflation are both about to run into major resistance. A recent article published in The Daily Signal told how The Tax Relief for American Families and Workers Act of 2024 is nothing of the kind. Instead, it is a mixed bag that includes welfare expansions, corporate windfalls, and inflationary deficits.

It is logical to envision that huge government deficits will result in further inflation and increasing interest rates as the government generates new money without increases in real productive capacity. such spending tends to crowd out private borrowing. In short, bigger government acts as an impediment or roadblock to increasing supply while increasing demand. While the velocity of money does affect inflation, government spending is where economist should center their focus.

 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Advancing Time: Danger Ahead, China Is Pushing, Pushing, Pushing

Advancing Time: Danger Ahead, China Is Pushing, Pushing, Pushing: There is danger ahead and the ramifications have the potential to be massive and devastating. China is pushing to become the automaker of th...