Oh, it's been a long while since a piece of economic propaganda masquerading as journalism made me want to laugh, curse, and wince - all at the same time.
I owe this unusual feeling to a March 14 puff piece in Bloomberg, co-authored by Simon Kennedy and Zoe Schneeweiss: "Why the Worst May Already Be Over for the Global Economy."
Rarely have I seen so much dangerous drivel under a single, misleading headline.
It's a desperate - but creative - attempt to put lipstick on a fundamentally broken economic pig. The authors deserve high marks for organizing, then spinning, statistics and adjectives with a careful disregard for trivial obstacles like "context" and "reality."
Indeed, their article has all the false hope, lies of omission, and misleading confidence of the propaganda ministries of losing armies.
You know the story: Whenever it becomes numerically obvious that defeat is inevitable, the losing side always steps up the "have no fear" puff pieces to boost morale on the home front.
That's exactly what we have here, like something cooked up in the bowels of the U.S.S.R.'s Pravda or China's People's Daily.
Let me show you what's really happening here...
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It's the Same from Waterloo to Gettysburg to Gallipoli to Wall Street
This Bloomberg story - and it is a "story" - confirms that the tools of dying armies can also work for dying economies.
As body counts or global debt levels rise, so does the hope peddling...
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Of course, it's one thing to have differing opinions - red or blue, bull or bear, Red Sox or Yankees. We all enjoy supporting our own views, candidates, or teams.
But when lives are being lost, say, or gigantic economies are rotting, the public deserves and requires blunt speak. The truth... not BS.
Folks, the United States is drowning in $1.027 trillion worth of credit card debt; average it out, and you find every American man, woman, and child has 1.5 credit cards.
The majority of the middle class lives essentially paycheck to paycheck, with the average American holding less than $1,000 in savings. That puts most of us a busted furnace, a new transmission, or an emergency room visit away from utter financial catastrophe.
Those Americans who do have a little something socked away rely almost exclusively on a debt-driven stock market to stay above water into retirement.
In short, this is no time for fact-starved puff pieces to lure more innocent investors into a dying, topping market simply to keep a fee-driven financial industry and debt-driven zombie market alive well past its natural expiration date.
But according to Kennedy and Schneeweiss... none of this matters.
The worst, they tell us, is likely over. Why?
Because the central banks have our backs...
Here's What the Central Banks (and Their Media Enablers) Have Actually Done
Yes, central banks around the globe have successfully bought time and the veneer of a "recovery," but at the staggering cost of printing $15 trillion in fiat currencies since 2008 and keeping rates near 0% (ZIRP) to -0.75% (NIRP).
Those efforts have ushered in the greatest global borrowing spree and debt bubble in the history of capital markets, with a three-handle debt-to-GDP ratio.
But to suggest, as Kennedy and Schneeweiss do, that a continuation of such "loosening," "accommodative," and "stimulus" debt policies are solutions to a debt-driven madness is like describing a teenager with dad's credit card as a "tycoon."
Or better yet, like describing a banker as a "savior"...
What? We're Supposed to Sit Back and Trust the Bankers?
The authors open with the comforting assertion that, "there are reasons to expect the current slowdown will be short-lived." They then cite Deutsche Bank AG (ETR: DBK) and Morgan Stanley (NYSE: MS) to make the equally comforting prediction that our recent market slide will "bottom out this quarter or next before an acceleration later in the year."
Whewwww! Great news! I was worried there for a minute, but I feel much better thanks to the wise and trusted research of Deutsche Bank and Morgan Stanley.
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But... last time I checked, Deutsche Bank was an über-levered financial tumor whose derivative debt exposure is currently more massive than all the combined assets of Germany. Deutsche Bank is on the verge of a collapse (again) should (another) taxpayer bailout fail to materialize.
And as for Morgan Stanley... perhaps Kennedy and Schneeweiss have forgotten that this was the same bastion of wise, sober financial forecasters whose book of crappy loans blew up in 2008, saved only by a $107 billion IOU to the United States government.
Ah, but who needs such perspective? All this troublesome context? Such facts? Certainly not Kennedy and Schneeweiss.
Rather, these fine journalists then continue shoveling hope by praising: 1) the recent "pause" on interest rate hikes at the Federal Reserve, 2) a likely trade war truce, and 3) more "stimulus" measures from China.
Break out the champagne! All is rosy, no? Well... not so fast.
As for the first point, the authors literally use the heading, "Central Banks to the Rescue," championing the wisdom of global central banks now loosening their hitherto "tightening" stance, following the "wise"... some might say "spineless"... decisions of Jerome Powell at the Fed and Mario Draghi at the European Central Bank to be more "patient" on raising rates.
Good grief, they even praised Draghi for "unveiling a new batch of cheap loans for banks."
That's not a bit different from praising a bartender for continuing to provide underage drinkers with more tequila shots in order to avert a hangover.
Wow. All I can say is "wow"...
It's clear these two have never once studied so much as a paragraph of market history. Because if they had, they would find that history replete with examples of low-rate, fiat currency--fueled market bubbles popping.
In fact, throughout history, all low-rate, fiat currency--fueled market bubbles have ever done is "POP!"
You know, like the Hindenburg "popped."
The trouble is, more debt and "cheap loans for banks" probably will cause markets to temporarily "rebound" in 2019... but the inevitable market DUI which such debt-serviced "rebounds" create will end up killing all the drunk investors who partake in these tequila-shot "recoveries."
Look folks, it's clear that our authors have forgotten an awful lot of market history. So it's completely unsurprising that they've forgotten all the good those debt-drunk global banks did for regular investors back in 2008.
Should we therefore be relieved to know that, despite bailing them out for crushing the world economy a decade ago, our central banks are once again sticking to the same bank-first/margin-debt template that crushed tens of millions of Main Street portfolios in the past?
No - and you shouldn't be surprised that the mainstream media is papering over other grave dangers to your hard-fought wealth...
The Trade War Could End Today; It Would Make No Difference
Our intrepid hopium-mongers spend some paragraphs praising the growing signs of détente in the U.S.-China trade war. As for the mutually assured destruction of this trade war, we've already talked about how this idea is effectively... well... irrelevant.
That is, trade war or no trade war, these Bloomberg authors omit the fact that both China (with a non-reported debt-to-GDP level of 300%) and the United States (with a ratio of 105%) are each so thoroughly debt-soaked and beyond the point of no return that a heating or cooling of this issue only postpones - but can't possibly prevent - the catastrophic implosion to come.
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Again, it's just a simple matter of history and math. All debt bubbles pop. Period. Full stop. And folks, at $244 trillion and counting, we are living in the greatest debt bubble of all time.
Do a few quotes from Morgan Stanley and Deutsche Bank make you feel warm and fuzzy against the lessons of math, time, and common sense?
Of course not. Those self-same lessons tell us not to put any faith in China riding to the world's economic rescue, either.
China's More Tin Tiger Than White Knight
It's altogether fitting that these reporter-cheerleaders are giving Chair Mao a run for his money in the propaganda stakes, because they end their puff piece with glowing praise for China's National People's Congress' "willingness to ease monetary and fiscal policies to support expansion."
"Expansion"? "Ease"? Again, such terms are mere euphemisms for more printed money, cheap loans, and bank debt expansion - all of which buys time by increasing credit bubbles whose subsequent and inevitable collapses are always in direct proportion to the size of the credit bubble that preceded it.
Folks, China's debt bubble almost defies belief. The country is a veritable Ponzi scheme of state-owned enterprises cannibalizing common sense under a red flag.
In other words, China's economy - its ballyhooed "miracle"- survives by borrowing from itself, by robbing Peter and Paul to pay... Peter and Paul. Such are the wonders of dictatorship.
If market collapses mirror debt bubbles (and we know they do), then the collapse to come in China (and radiate outward at the speed of 1s and 0s) will surely be the largest and most dangerous in history.
China is a country with 65 million empty apartments that lose value daily, a country that borrows money at a monthly rate of 5% of its GDP and that sports an actual debt-to-GDP ratio that, again, the Institute of International Finance (IFF) placed at 300%!
But these facts don't bother Kennedy and Schneeweiss. Not a bit. They're enthusiastically cheering as China (which accounts for more than 40% of global GDP) ensconces itself waist-deep in high-test gasoline...
... and with every move to "ease" and "expand" lights another match.
It's almost hard to believe (or read) such mainstream insanity passed off as economic journalism. Again, it makes me want to laugh, curse, or wince...
And then it just gets desperate - a barrage of random economic factoids, cooked numbers from various and sundry governments, and irrelevancies meant to trick us into thinking things are A-OK...
They're Looking for Growth in All the Wrong Places
Kennedy and Schneeweiss also cited how the HIS Markit's indicator of global growth rose in February from a 28-month low.
What they forgot to mention is that's what always happens when central banks open their credit spigots: temporary and minor growth at the expense of longer-term, postponed pain down the road...
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Even more shamelessly, these Bloomberg wizards then cited "good news" from Germany, namely that the water levels on the Rhine have risen, which will help barge traffic...
It's going to take a lot more than "rising water levels" and "increased barge traffic" to save Germany from a manufacturing sector and PMI that are sinking faster than the Bismarck - or that a mere decimal point of GDP is what saved it from officially entering a recession?
In a final Hail Mary, these spin-meisters then cited "hopes" that the global labor market is showing good signs of "tightening"... but I'm not even sure what that means.
Nevertheless, this "tightening," they maintain, will "provide reason to hope consumers will keep spending."
"Hope." If you want some, Kennedy, Schneeweiss, and their bosses at Bloomberg - and their buddies at Deutsche Bank and Morgan Stanley - are selling it by the ton. For cheap.
What they didn't offer, sadly, was blunt speak: the truth, which is what we all need and deserve today more than ever.
As for their "hope" that consumers (i.e., you and me) will keep spending, let me remind these two market spinners that consumers have never been in more pain, more debt, and more danger than they are today.
No fooling: There are 480 million credit cards in circulation - again, 1.5 for every American. Seven million Americans are defaulting on car loans; there's $164 billion in student debt in default.
The American consumer is tapped out. Dry hole. The only spending happening is credit card arbitrage.
This may further explain why names like Pepsi, JCPenney, Victoria's Secret, Gap, and Tesla are closing hundreds of doors (and shedding thousands of jobs) across the country, or why places like Payless Shoes are simply going bankrupt.
Folks, it's not because Amazon.com (which makes no profits and pays no taxes) is doing so well.
Nope, the real reason is sadder and simpler. Consumers are hurting, and markets, led by debt and debt alone, are topping, gyrating, and convulsing - symptoms that always precede massive drawdowns.
So no, the worst is not over. In fact, it hasn't even begun.
If the central banks - the conquering heroes in this despicable Bloomberg propaganda - want to keep distorting free markets and heading off perfectly normal recessions by suppressing rates and printing more money, they can only buy time.
But in doing so, they simply add more fuel to the national and global debt fire - a fire which will, the second interest rates rise, burn every last investor who prefers hope over facts.
My sole aim today is to offer these facts, not hopes. Hope is for beggars; facts are for fighters.
And make no mistake: We're in the fight of our lives here, up against insane, debt-addicted central banks and governments and their enthusiastic media boosters.
It will get ugly. But informed investors, armed with candor and not baffled with spin, will make it through.
As always, be careful out there.
Your Financial Future Is at Stake (Are You Prepared?)
If you're like most Americans, you've felt a sense of market turmoil ahead. We could be in for another white-knuckle ride... a "Great Reckoning," if you will.
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About the Author
25-year run as a hedge fund portfolio manager, family office chief investment officer, managing director and general counsel. Internationally recognized expert in credit and equity markets as well as macro risk management.