Is The Next Downturn Coming?
- If its due to fear of environmental collapse, it will be very bad
Predicting the exact timing of financial downturns is impossible, but there are times when the signs of a correction are ubiquitous. Years of ZIRP because of 2008 followed by even more liquidity due to Covid, has resulted in massive asset and even non-asset bubbles. When people are putting billions of dollars of real money into absolutely nothing (crypto, GME, AMC) and deli stores with 35K sales/year have a market cap of 100 million (look up Your Hometown deli in New Jersey), then it probably means we're closer to the top than to the bottom. No one is in cash these days because interest rates are zero. So equities are at maximum valuations, but not only that, people have been finding all sorts of ways to spend their money like investing in intrinsically valueless assets like digital NFTs and crypto currencies. If you look at historical bubbles, right before the pop there was always signs of excess. 2007 housing, 1999 dot-com, 1929 roaring twenties, etc. There is a future for blockchain technology but can anyone argue with a straight face that we can sustain all of Bitcoin, Dogecoin, poopcoin, Safemoon, Ethereum, Ethereum Junior, and Ethereum & Friends? People are just piling all their money into these things, yet there is literally nothing there. When sentiment craters, people will realize the emperor has no clothes. Who is going to buy all these worthless beanie babies? We're therefore at a top. So now what?
I think it's worth thinking back to late 2019, early 2020, before Covid, and when I made a lot of the posts above. The Australia wildfires I think were a psychological turning point for many in a way that previous environmental disasters were not. The G7 country of Australia became ground zero symbolizing the new world we find ourselves in. For several months, the world saw those lush green forests on fire, and orange skies over the Sydney Opera House. I think for many, it was then that the climate problem became real. Then we had Covid, so everyone forgot again. But there will be another fire season this year. Reports everywhere are expecting it to be really bad.
There will be a day when the world will realize there is no infinite future of infinite growth. We live on a non-infinite planet. If and when that realization occurs, when bankers and investors realize that we are long past our carrying capacity, that nature giveths but also takeths away, and that the primary assumption that undergirds our entire capitalist financial system is wrong, there will be a reckoning. One day people will realize we cannot keep cutting down trees and poisoning oceans into eternity, and that these actions will eventually result in business revenues and GDP to fall. An increasingly decimated ecosystem is a negative influencer for stock valuations. That will be reflected in the markets as fear. There will be a 1929, but with no recovery. The entire process will potentially take years, with fits and starts, but it will occur. We live beside a hen that lays golden eggs, but that hen has been neglected and abused, so one day there will be no more eggs, or at least they will be much smaller and fewer between. When people realize that not policy but the environment is the superstructure of the economy and that superstructure is failing, it will probably be THE inflection point of this short history of civilized humanity. When the economy crashes due to the fear of coming ecological collapse, there will be no return.
I don't know when THE crash will occur due to a realization of a non-infinite-growth future but it will happen one day. This CNN article from 2 days ago reports the IMF says that climate change can cause a financial crisis.
Climate change could ignite a financial crisis, IMF official says
What's incredible to me is that a concept like this can actually be considered news. Is it not obvious that our economy is based on taking the living and turning it into the dead? What we define as GDP is actually taking forests and rivers and polluting them so that we can have money in our bank accounts. Production of "natural resources" is simply the destruction of nature. Every facet of our economy is about causing pollution. When I buy grapes from South Africa for $1.99/pound, it's because the cost of the pollution caused in packaging then shipping them to my local Walmart is borne by Mother Earth. How else can I get grapes from the other side of the world so cheap? It's because all that gas and plastic pollution went into the environment for free. No one had to pay for it. Except the environment.
Getting back to the market bubble, we're somewhere near a market top. We're also coming into a drought/fire season that may result in months and months of seeing the world on fire in the way Australia was. In this case, it'll be the U.S. and in particular, California. I think, therefore, there'll be incoming reasons for financial pessimism. This most certainly will not be the final financial collapse, but I'm thinking there's a pullback coming.
I would like to say that some people believe the already frothy markets will continue to stay on fire for the next two years due to re-opening. They argue the high P/E ratios now will correct themselves as companies see their growth rebound. I think these arguments are fine, but they don't preclude a near-term correction. So what I'm arguing is not necessarily a crash, but the circumstances exist for the possibility of a big correction. The final death-throe collapse, hopefully, is still a while away.
Lastly, I read someone's financial opinion yesterday - he said he felt Bitcoin was a forward indicator of the market. BTC peaked in April. He felt markets lagged BTC by 2 months. So we're about there now. So if you're trying to time the markets, that's something to think about.
Drought saps California reservoirs as dry summer looms
Shocking photos show impact of California drought
California faces worst drought in decades: 'Economic disaster'
A severe drought is gripping the Western U.S. as wildfire season begins
- If its due to fear of environmental collapse, it will be very bad
Predicting the exact timing of financial downturns is impossible, but there are times when the signs of a correction are ubiquitous. Years of ZIRP because of 2008 followed by even more liquidity due to Covid, has resulted in massive asset and even non-asset bubbles. When people are putting billions of dollars of real money into absolutely nothing (crypto, GME, AMC) and deli stores with 35K sales/year have a market cap of 100 million (look up Your Hometown deli in New Jersey), then it probably means we're closer to the top than to the bottom. No one is in cash these days because interest rates are zero. So equities are at maximum valuations, but not only that, people have been finding all sorts of ways to spend their money like investing in intrinsically valueless assets like digital NFTs and crypto currencies. If you look at historical bubbles, right before the pop there was always signs of excess. 2007 housing, 1999 dot-com, 1929 roaring twenties, etc. There is a future for blockchain technology but can anyone argue with a straight face that we can sustain all of Bitcoin, Dogecoin, poopcoin, Safemoon, Ethereum, Ethereum Junior, and Ethereum & Friends? People are just piling all their money into these things, yet there is literally nothing there. When sentiment craters, people will realize the emperor has no clothes. Who is going to buy all these worthless beanie babies? We're therefore at a top. So now what?
I think it's worth thinking back to late 2019, early 2020, before Covid, and when I made a lot of the posts above. The Australia wildfires I think were a psychological turning point for many in a way that previous environmental disasters were not. The G7 country of Australia became ground zero symbolizing the new world we find ourselves in. For several months, the world saw those lush green forests on fire, and orange skies over the Sydney Opera House. I think for many, it was then that the climate problem became real. Then we had Covid, so everyone forgot again. But there will be another fire season this year. Reports everywhere are expecting it to be really bad.
There will be a day when the world will realize there is no infinite future of infinite growth. We live on a non-infinite planet. If and when that realization occurs, when bankers and investors realize that we are long past our carrying capacity, that nature giveths but also takeths away, and that the primary assumption that undergirds our entire capitalist financial system is wrong, there will be a reckoning. One day people will realize we cannot keep cutting down trees and poisoning oceans into eternity, and that these actions will eventually result in business revenues and GDP to fall. An increasingly decimated ecosystem is a negative influencer for stock valuations. That will be reflected in the markets as fear. There will be a 1929, but with no recovery. The entire process will potentially take years, with fits and starts, but it will occur. We live beside a hen that lays golden eggs, but that hen has been neglected and abused, so one day there will be no more eggs, or at least they will be much smaller and fewer between. When people realize that not policy but the environment is the superstructure of the economy and that superstructure is failing, it will probably be THE inflection point of this short history of civilized humanity. When the economy crashes due to the fear of coming ecological collapse, there will be no return.
I don't know when THE crash will occur due to a realization of a non-infinite-growth future but it will happen one day. This CNN article from 2 days ago reports the IMF says that climate change can cause a financial crisis.
Climate change could ignite a financial crisis, IMF official says
What's incredible to me is that a concept like this can actually be considered news. Is it not obvious that our economy is based on taking the living and turning it into the dead? What we define as GDP is actually taking forests and rivers and polluting them so that we can have money in our bank accounts. Production of "natural resources" is simply the destruction of nature. Every facet of our economy is about causing pollution. When I buy grapes from South Africa for $1.99/pound, it's because the cost of the pollution caused in packaging then shipping them to my local Walmart is borne by Mother Earth. How else can I get grapes from the other side of the world so cheap? It's because all that gas and plastic pollution went into the environment for free. No one had to pay for it. Except the environment.
Getting back to the market bubble, we're somewhere near a market top. We're also coming into a drought/fire season that may result in months and months of seeing the world on fire in the way Australia was. In this case, it'll be the U.S. and in particular, California. I think, therefore, there'll be incoming reasons for financial pessimism. This most certainly will not be the final financial collapse, but I'm thinking there's a pullback coming.
I would like to say that some people believe the already frothy markets will continue to stay on fire for the next two years due to re-opening. They argue the high P/E ratios now will correct themselves as companies see their growth rebound. I think these arguments are fine, but they don't preclude a near-term correction. So what I'm arguing is not necessarily a crash, but the circumstances exist for the possibility of a big correction. The final death-throe collapse, hopefully, is still a while away.
Lastly, I read someone's financial opinion yesterday - he said he felt Bitcoin was a forward indicator of the market. BTC peaked in April. He felt markets lagged BTC by 2 months. So we're about there now. So if you're trying to time the markets, that's something to think about.
Drought saps California reservoirs as dry summer looms
Shocking photos show impact of California drought
California faces worst drought in decades: 'Economic disaster'
A severe drought is gripping the Western U.S. as wildfire season begins
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