The Longest-Running Bull Market in History Won’t Last Much Longer

Today, a hurricane is hitting the west coast of Ireland.

Here in the south, wind bends the trees, rain smashes against the windows, and dark, low clouds scuttle across the treetops.

Stormy days

Back in the US, the stock market has suffered through a couple rough days. Trade wars…impeachment…recession warnings…Sanders’ heart problems — commentators look for explanations.

But, like the clouds o’erhead, Mr Market goest whither he wilst.

Where he’s going now, we don’t know. Every time we think he’s ready to whack investors — by selling off hard — he changes his mind.

And every time the stock market seems to be headed down, there is new talk to fake out investors — a trade deal…a tax cut…rate cuts…quantitative easing.

Here we hesitate. We would like to say that ‘sooner or later’ Mr Market will ignore the headlines…the Federal Reserve…the federales…and the president…and get on with his important work — separating fools from their money.

But we’ve used this ‘sooner or later’ phrase so often, it’s probably time to take out the ‘sooner’ altogether.

Gods of time

This is the longest-running bull market in history…and the oldest expansion ever seen. Whenever it ends, it will be ‘later.’

But nothing lasts forever. And neither the expansion nor the bull market is likely to defy the gods of time for much longer.

In 2007, the markets gave way when they finally realised that the average person couldn’t afford the average house. Today, as The Wall Street Journal informed us on Tuesday, the average person can’t afford the average car.

And then came news that the backbone of the US economy is giving way. CNBC:

A gauge of US manufacturing showed the lowest reading in more than 10 years in September as exports dived amid the escalated trade war.

The US manufacturing purchasing managers’ index from the Institute for Supply Management [ISM] came in at 47.8% in September, the lowest since June 2009, marking the second consecutive month of contraction. Any figure below 50% signals a contraction.

The new export orders index was only 41%, the lowest level since March 2009, down from the August reading of 43.3%, ISM data showed.

The average world citizen may be getting richer in time prices for basic commodities. Technology and innovation may be reducing costs and increasing efficiency and productivity. New fads, fashions, and gadgets may turn heads and waste time.

But for all the technological progress of the last 2,000 years, we still have wars, famines, disease, heartbreak, misery, depression, irritable bowels, crashes, suicides, flat tires, envy, passion, jealousy, and hate.

In the field of economics, for example, many are the new things that have come along in the last 100 years.

Exchange-traded funds (ETFs), algorithmic trading, the Fed’s dynamic stochastic model, negative rates, Keynesianism, Modern Monetary Theory (MMT), data dependence, hedonic price adjustments — and much, much more.

But none of these breakthroughs and innovations are going to prevent average Americans from going through Hell in the next few years. Instead, they’re going to make it worse.

Dumbbell policies

The importance of Bernie Sanders’ heart operation is that it leaves Elizabeth Warren with the left wing of the Democratic party all to herself…and gives her the inside track for the nomination.

(In fact, we made a bold prediction on Tuesday: Warren will be our next president. If not in 2020, then in 2024.)

And the importance of Elizabeth Warren’s nomination is that if Wall Street is still standing when she gets anywhere near 1600 Pennsylvania Ave…it won’t be standing for much longer.

Like Donald Trump, she sees the economy as something to be managed, manipulated, and brought to heel. But unlike Mr Trump, she also has all the bugaboos and claptrap of modern economics and old-fashioned leftist redistributionist politics too.

In either case, when the crisis comes, no matter who is president, the response will be about the same.

We’re in an ‘Inflate-or-Die’ trap. Few politicians could resist. And neither Mr Trump nor Ms Warren will even try.

Both aim to be strong leaders. And when you’re in an Inflate-or-Die trap, strong leaders will want to get out of it in the worst possible way.

That is, they will choose the worst way forward — more spending, more debt, and more dumbbell policies.

Cash for clunkers

Mr Trump is already increasing federal spending — and debt — faster than any president since Lyndon B Johnson. During the last two fiscal years — which should have been years of surpluses — the Trump team added debt at the rate of $24 billion per week.

Imagine what will happen when the crisis comes.

First, Trump will go on a rampage against the Fed…and Fed Chair Jay Powell in particular.

It won’t be long before the Fed chief (Powell or someone new) is more accommodating — that is, ready to cut rates deep into negative territory and undertake a massive programme of stock and bond buying, à la Japan.

Then will come the fiscal stimulus (aka inflation) in the form of a tax cut for the masses…maybe even a tax credit for everyone.

This will be quickly followed by trillions of dollars of new shovel-ready infrastructure spending, more medical care, housing credits, cash for clunkers, and other assorted bamboozles.

The deficits will soar to $2 trillion a year. And stocks…as well as corporate bonds…will collapse.

Political sideshow

Will it be any different under Ms Warren? Some hogs will be slaughtered…but new swine will take their places at the trough.

And the effect — more fake money, more debt, more power and money to the Deep State — will be the same.

Housing, infrastructure, medical care, the poor — even the Pentagon — will get more money.

Ms Warren’s taxes on billionaires will make headlines, but from an economic standpoint, they will be mostly a political sideshow — designed to appeal to her base by punishing the rich.

Ms Warren believes in demand management, countercyclical policies, stimulus spending, and the rest of the voodoo known as ‘modern economics’ as much as Mr Trump, probably more. She won’t really want to raise taxes — not net, not in a crisis.

Besides, there aren’t that many ultra-rich people in the country. And they can afford good tax lawyers.

By the time the lobbyists and insiders get through with her proposals, Ms Warren’s wealthy contributors will have little to fear.

The rest of us, though, are in for trouble.

Regards,

Bill Bonner


Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.


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