Extraordinarily Bullish
Don't own bonds.
“I would rather have questions that can’t be answered than answers which can’t be questioned.”
attributed to Richard Feynman
Here comes the good deflation:
A Small Victory
Via Grant’s:
“Good riddance to flexible average inflation targeting. The Federal Reserve is poised to scrap its 2020-era initiative to compensate for periods of insufficient inflation by permitting price pressures to exceed the 2% per-annum target in a reciprocal manner, Fed chair Jerome Powell revealed Thursday.”
“Average Inflation Targeting” is one of the most idiotic ideas to ever come out of the Federal Reserve, and that’s saying something. Former St. Louis Fed wanker Jim Bullard explains:
I posted this in April 2021:
Over the years, hundreds of millions of Americans have been permanently and materially harmed by the Fed’s monetary and Congress’ fiscal pro-inflation idiocy.
Powell, September 2023: “People Hate Inflation. Hate it.”
June 2024: “Lower income people at the margins of the economy have the worst experience experience the most pain from inflation.”
Powell, March 2025: "Your grocery bill is about PAST inflation."
The contempt Powell clearly has for most Americans is on display again below. Jerome has absolutely no clue how 90% of America lives. Why would he? He's worth 9-figures and has been a Wall Street insider for 40+ years.
Past Inflation (if you believe the CPI):
Also via Grant’s:
“Politicians in the nation’s fourth-most-populace state, meanwhile, choose to combat the inflationary scourge via free money giveaways. New York Governor Kathy Hochul announced yesterday that the Empire State will mail “inflation refund” checks ranging from $150 to $400 to New Yorkers earning $150,000 and below later this year, with roughly eight million local residents eligible for the payments.
It’s how we roll in New York, fighting fire with fire.”
Below: Milton Berg, Russell Napier, Edward Altman, Chris Whalen, Rupert Mitchell, Marc Faber, Porter Collins, Vincent Daniel, Daniel DiMartino Booth, and Pippa Malmgren.
Milton Berg
I’ve posted on Berg before, including back in September 2023, and noted, “This is one podcast you might want to slow down instead of speed up. Berg is an old-school technician who throws out a lot of data.” If you watch the video he has a number of charts.
“We're not really creating tariffs We're just reciprocating to the tariffs that have been created all over the world…I am not negative on tariffs at all. I think people aren't really aware of the fact that countries throughout the world
put tariffs on us, and I think it's mainly a negotiating tactic. I think we have a great economy, and what they're trying to do in our government is to improve the economy.”
Farley: “If there was policy that you didn't like, or didn't think was good, but the technicals were still exhibiting what you perceived to be bullish action, you would have the exact same technical view?
Berg: “That is correct. My technical view overrides my fundamental view. If my technical view is bullish, I'll say I guess I don't understand the fundamentals, which are bearish, and probably ultimately the fundamentals that I think are bearish will prove to be bullish. Currently I'm bullish on the fundamentals and certainly bullish on the technicals.”“I know many clients of mine who shorted into April 9th, believe it or not. We turned bullish, but many people shorted into April 9th, and many people are still shorting the market on the fundamental assumption that Trump is a terrible president and Scott Bessent doesn't know what he's doing, and the economy is going to collapse.”
“This is a very rare historic move, to have 90 times as much upside volume as downside volume. When you combine these two together1, you'll notice this never took place in a bear market rally, but it always took place at the end of a bear market.”
“All we're looking at is two pieces of data. S&P has to have gained 2% on the day, and the upside to downside volume the S&P has to have been a minimum of 45 to one That's a rare signal.”
“A TRIN below four means there was overwhelming volume in up stocks relative to the number of stocks that were up. On April 9th the TRIN was 0.17. I think it was the lowest in history, Okay? We're talking about historic data. TRIN on the New York Stock Exchange was 0.17. The people follow TRIN will know we've never seen that before. I don't think we've seen it. We certainly haven't seen it since 1957.”
“This week's Barron’s shows the highest number of bears in 30 years, and the other surveys as well are showing more bears than bulls. With the market up 17% you'd think that would change, and I see my clients, unfortunately, I present
this to some of my clients, and some of my clients were shorting this rally.”
“Warren Buffett. He's the greatest investor - one of the greatest investors of all time - but he's banking on a crisis. He's using valuation. He's a market timer. He's using valuation to time markets, and he's raised $300 billion in cash, and you had a 20%, 18% pullback, and he had a 24% pullback. It's not enough for him, because he wants valuations to get cheap. Now you're not going to get as cheap as it got in 1977-1978. You can't expect that to happen.”
“I think gold is in a sense overvalued. I don't think gold is in the beginning of a bull move, I think gold is the end of a bull move.”
Berg says that the “gold to CPI ratio” means gold is overvalued.
Russell Napier
“My view is that most people choose not to be in the Chinese bloc”
“To me, it’s insane that the world’s second-biggest economy [China] run by a man who likes to control things [Xi], has given up control of the thing that really matters, and therefore it seems to be unsustainable. And in holding onto it, he’s driven China’s total non-financial debt to GDP ratio to 192% of GDP. America’s about 150. We go back 15 years, China was half the level of America. So we’re really not see anything like this for any major economy in human history, debt to GDP to go up that quickly.
He needs to do something about it. We all know how to do anything about it. He can phone up Tim Geithner2. Tim can help him. He can print money - he printed a lot of money - but you can’t do that with the exchange rate policy. So I think he’s going to have to do something about that. I would devalue initially because you’d be obviously wanting to create a lot more renminbi. That’s the whole point. And how you go about inflating away your debts.
That would look like a grand gross deflation shock. But I think we probably know now that tariffs fall pretty closely behind when Xi Jinping has to get into that world. And then we get into these really interesting questions about how do you reconstruct one global monetary system after that? Of course, my conclusion is you can’t. You’d have to construct two global monetary systems after that. That’s why that exchange rate is so important. And also, Grant, it forces people to take sides.
So if I was running Malaysia and the renminbi devalues, it’s very tempting for me to devalue the ringgit. But the Americans will be very keen for me not to devalue the ringgit and they’ll promise me in return, great access to American markets, which is I really think what Scott Bessent is up to. I think people have got this wrong. I think that’s what he’s trying to do here.
And therefore, if you follow the Chinese currency down, you may be saying, actually, we are in the Chinese bloc. When I do this talk in Asia, I get a lot of pushback from people who say, “I’ve got a very Anglo-Saxon view in the world.” And I think that’s an acceptable criticism of it. But my view is that most people choose not to be in the Chinese bloc. Now I think if you’re sitting in Singapore or something, you may come to a different conclusion, but my opinion is most people choose not to be in the Chinese bloc, whether they’re Vietnam, Malaysia, Thailand, Philippines, Taiwan, South Korea, Japan, they choose not to join the Chinese bloc.”
“If we’re going to inflate away our debts, which as we discussed is probably the only political way that isn’t incredibly dangerous, don’t own bonds.” - Napier
I have entire posts - and Felix Somary has a cautionary tale here3 - opposing this very common view that “inflating away the debts” is somehow not “incredibly dangerous.”
As Darth Powell says:
"Deflation is to rich people what inflation is to everyone else."
Dr. Edward Altman
Creator of the Z-Score bankruptcy prediction model
“Normally in a crisis - and we had a crisis back in the pandemic days, in the financial and economic markets - normally it's time to reduce risk, but Covid was really different, in the sense that it motivated more risk by putting debt on the balance sheets of companies and the government. So we had an enormous buildup in debt, which should be kept in mind in talking about what's going to happen going forward.”
“To give you an example of how different things were for bank loans, in 2024 the default rate was three times higher for bank loans than high-yield bonds. Close to 6% default rate for bank loans and for bonds it was less than 2%. So something was going on, and and it was pretty easy to see bank loans are floating rate So they fluctuate as the interest rate fluctuates, and particularly with high inflation we were in a relatively high interest rate period compared to earlier years. High-yield bonds - very low interest rates, because they're fixed rate, and most of those were as issues during COVID at very low interest rates, so for the first time we saw this dichotomy. For the statisticians out there, the correlation in the past between these two markets was almost perfect, about 0.9, perfect being 1.0, but in 2024 they were enormously different. There was stress in the economy for companies that were issuing debt at a floating rate, and therefore were paying and needed to pay much higher interest rates. So it wasn't clear to many people whether we were in a benign credit cycle then, or a stressed one, when a default rate was more than twice the historic average for bank loans.”
“In my opinion - no question - there's going to be more defaults among particularly small and medium-sized firms, but even large firms, going forward, even if there's not a recession.”
“Why did we lose 98% of AAA companies, and similar types of downgrades from double-A and A companies? Increased leverage in the system.”
“Be cautious. Certainly don't increase your leverage too much now, until you're confident you have the cash flows and the ability to service it, because it'll come back to bite, you even if the cost of debt is still not historically that high.”
“The thing that's different today than it was even in 2007 is the enormous buildup in debt, at both the company and the government level. So that's not going away.”
“The credit cycle leads the business cycle.”
Chris Whalen
On the Soar Financially podcast
“I am not a big fan of macroeconomics. I think that I'm a microeconomist. I tend to focus on the particular, more than the generalizations, because when you generalize, you're always wrong. The unique thing about human action is you're always wrong if you try and step back and generalize about something as large as the global economy. That's to me absurd. I'd much rather look at what human beings are doing at the micro and local level.”
I think the above is a simple summation of Austrian Economics.
As Tom McClellan says, get rid of the FOMC and just use the 2-year yield.
Bernanke, Yellen, and Powell decided to do things that were completely absurd, but there was nobody to question them.
“In order to understand inflation, you have to know how we got here, but you also need to understand particularly the last 15 years since 2008, because the Federal Reserve Board under Ben Bernanke, then Janet Yellen, and finally Jerome Powell kind of loosed the bounds of earth and decided to do things that were completely absurd, but there was nobody to question them. Members of Congress don't even know what monetary policy is, so the Fed has kind of made it up as they go, and their actions impact not just the US economy, but the global economy, and nobody has any choice. They just have to accept whatever these people do.”
“I hope they will never buy mortgages again. They did not understand what they were doing.”
“We have people out there who have 2% mortgages, and the Fed owns mortgage-backed securities that have a one coupon. That's bad. A 1% Fannie Mae is trading at about 70 cents on the dollar today. That's why the Fed is losing so much money by the way…I hope they will never buy mortgages again. They did not understand what they were doing.”
“Inflation is the American pastime. We don't like paying taxes.”
Here’s a great clip on MBS purchases that Darth Powell sent me.
Whalen on the Financial Sense podcast:
“When Congress realized that they could spend as much money as they wanted to, and fund it with debt, without having to go back to the voter - that's really where I think we got into trouble.”
“As we have accumulated all this debt, the Fed's independence if you will has been reduced and eliminated, because they have to keep the Treasury market open.”
Rupert Mitchell with Maggie Lake
Rupert is also know as Blind Squirrel Macro.
“Where does earnings growth come from? If the government is spending money at a 7% deficit, a lot of those earnings are coming directly or indirectly from the government”
“Robo-taxis is a business model that's born in Excel spreadsheets and born in a ZIRP world.”
Marc Faber
“GDP growth is an irrelevant statistic”
“What is relevant in an economic system is the well-being of each citizen. Is the standard of living of the typical American increasing or decreasing? I can say there are statistics that clearly show that your parents and my parents at the age of 35 they had higher incomes in in real terms, inflation-adjusted, and they had more wealth than we have nowadays. Someone who is nowadays 35 years old is not as prosperous as his parents were when they were 35. We can measure that fairly precisely, and there indicators that show how many people as a percent of the population live paycheck to to paycheck. It is a very high percentage, close to 70%. How many people live at home, and how many homeless people you have - that they should put in the statistics in America. Count the homeless people on the street, because a lot of them are economically no longer functioning.”
Porter Collins and Vincent Daniel
Collins: “For the first time in a while I said to Vinnie I wouldn't mind managing some money when when the drawdown happens, right? I love it when markets are down, because your favorite positions - they go on sale, right? You get a chance to to to buy them. I think you have to have that mentality of when markets do go down - hey, what's on sale?”
Collins: “The money supply growth is is off the charts right now, and you're sort of in this debasement inflationary world, right? I know - CPI and whatever aside - but you're in an asset-inflation inflated market.”
Collins: “You talk about currency, and the dollar going down. Well, one thing it's going down against is gold, and the yuan and every other currency around the world is going down against gold, and that is the real neutral reserve asset. That's how I think the three of us have thought about it for quite some time, and I know the three of us have been long gold since 2015 and 2016. [Gold] is the true neutral reserve asset around the world.”
Daniel: “I will say, Scott Bessent talked a good, tough game about how Yellen screwed up about issuing T-bills in lieu of long duration funding, and he's doing the exact same thing. Why is he doing the exact same thing? Because we can't afford or can't issue long-term debt at these prices, or if you put out a calendar issuance of massive long-term debt funding, all else being equal, it would probably blow out. The one thing that they have yet to solve for in this Trump 2.0 economic pivot is what to do with rates, and I'm assuming we're going to see a heck of a lot more theatricality and deception.”
Daniel: “People always ask us whether we’re bullish or bearish. What do you think of the S&P? I don't have an answer for them. However, when people ask me this, I throw questions at them and say, "Well, are you bullish?" And they're like "Yes, I believe Trump - through this tariff relief - is going to create an economic spark" and the like. I say if that's the case, why don't you own energy, right? Because none of this is going to happen without an increase in energy consumption.”
Daniel: People say, "What do you think of Palantir?” and I'm like, I don't think about Palantir, right? So I just walk away.”
Danielle DiMartino Booth
“It's not the job of a central bank to shepherd the labor market. Now don't get me wrong - it is in their mandate, and if it's in their mandate, then they need to open their eyes and do something about the labor market not being solid but the two inherently conflict. Minimizing inflation and maximizing employment are inherently in conflict.”
Are they inherently in conflict? Why is a higher cost of living a good thing for employment?
“I spend time with a lot of these high school juniors, high school seniors, college age kids - they have an extraordinary work ethic, they really do.”
I see the same thing among twenty and thirty-somethings. The nose-to-the-grindstone types just don’t get any attention on the news.
Pippa Malmgren with Grant Williams and Demetri Kofinas
“Conspiracy theory: a phrase actually created by the intelligence community to stop people from asking any questions of them.”
Demetri brings up what are commonly known as “9/11 truthers” - it seems to me mostly to criticize that they are not questioned enough, or something. I don’t know. To me, it’s the official narrative that is not questioned enough. Pippa counters with her own legitimate questions - she is not afraid to question.
I suggested to the panel that they check out my short post from February 2023, “Random Memories of 9/11".” Whether they will or not, who knows.
They then get into UAP’s - yes, they exist, obviously. What they are, nobody knows.
As you may know, I’ve looked into this a lot over the years and - along with John Keel - this is the closest I’ve found to my own views, from screenwriter Richard Hatem (oddly the original Youtube video of this interview is now deleted, so I’m glad I saved this clip locally. Audio and transcript4 are here):
This was the part of the interview I found most interesting:
“Today, nobody’s kids are in school together, and so there’s no point of emotional connection.”
“I grew up in a family where my dad served Kennedy and Johnson on the Democrat side, and then Nixon and Ford on the Republican side. So I grew up in a very bipartisan Washington where the chairman of the Democratic Party, Bob Strauss, and the chairman of the Republican Party, Howard Baker, were best friends and played poker illegally every Friday night. And deals got sorted out because they were all very... they had personal relationships. And I think this is a critical component of understanding what’s happened just as a...
I’m going to start with a detail that’s really interesting. So why is nobody friends anymore? It’s partly because Washington was the center of the money tap that got turned on, particularly after the financial crisis. But it has been really since the Second World War, an ever-increasing flow of money, which meant inflation really got a foothold here. So property prices kept going up and up and up and up, and basically all these elected officials could no longer afford to have their families in Washington. So they sent them back to wherever their home state is. And what that meant is their children were no longer going to the same parties together. Because that’s where the congressmen, senators, the journalists, everybody in politics, would get to know each other, was because the kids were friends and the kids were in the same sports teams. And it created rapport and connection. Today, nobody’s kids are in school together, and so there’s no point of emotional connection.
Plus we have these Freedom of Information Act laws, sunshine laws, that say if you’re going to talk about an official issue with someone involved in that issue, you must have a lawyer present the minute three people are involved in the conversation, who is recording what happened. So there’s no way to have any private conversations about how are we going to cut a deal here.
So I’d add to that as well. One further thing is cameras. When cameras were introduced into Congress, and I don’t remember the year C-SPAN started, but that felt like a moment of wonderful transparency. But actually, what it’s done is turned the Congress into a theater where no one can say anything that is off the party line, because it’s recorded and all the donors are going to hear it. So suddenly everyone becomes much more glued to the official position of wherever they are on the spectrum and there’s just less and less flexibility.”
“A tax bill that locks in over $40 trillion in debt by 2027 can only push yields higher and the dollar lower. The EU is going to keep cutting rates, and all of Asia is going to need cash. Did I say we need cheap oil?”
The S&P 500 index being below its 252-day moving average is the other indicator Berg is talking about here.
I assume this is a senior moment? Geithner left the Fed in 2009 and was Treasury Secretary for Obama from 2009-2013. Then he went off to his reward at private equity outfit Warburg Pincus.
“state bankruptcy is a one-time surgical intervention, while inflation is a permanent poisoning of the very bloodstream of a society.”
“At a meeting of the Society of Economists in Vienna, when the Mark was quoted at 80 to the dollar, and the Austrian Krone at 60, I urgently warned of the danger that the currency would lose all its value, and proposed immediately after the Armistice, and repeatedly thereafter, that Germany and Austria declare a state of default.
My reasoning was not understood, and the fact that a banker should make such a proposal was considered paradoxical. However, state bankruptcy is a one-time surgical intervention, while inflation is a permanent poisoning of the very bloodstream of a society. After state debts are wiped out, new financing can be undertaken immediately, while inflation means a prolonged wait until the currency has lost all value. Despite the enormous loss that state default entails, it clarifies the entire situation, and the total damage thus sustained cannot be compared with the appalling terminal stages of an inflation.
l am today [Somary died in 1956 - RH] more than ever convinced that my views then were correct. Much wretchedness in the intervening period could have been avoided through an immediate declaration of bankruptcy: the steady series of devaluations, the total destruction of confidence in government, the prostitution of the economy which governments so often slavishly tried to justify. The banks resisted most strongly of all, but they too would have fared better with a default, which would have allowed them to clear their balance-sheets immediately. Instead they dragged on for another decade in Berlin, Vienna and Budapest, with repeated individual collapses, until the world-wide crisis revealed the true dimensions of the situation.
…when the bank [Schumpeter] joined after leaving the Finance Ministry collapsed, he ruefully admitted that l had been right; and added with irony that all he had left now was his mother's assets that had been left under my management. He was not alone in that position: a whole series of individuals who publicly attacked me then confided to me either their own or their family accounts.”
I had especially sharp disputes with my old classmate and friend Joseph Schumpeter, then Austrian Finance Minister, on the question of inflation versus bankruptcy. He implored me to organise a consortium in Zurich, the prime currency market of the continent, to maintain the exchange rate of the Austrian Krone. l told him that was impossible: Austria's enormous state debt had to be liquidated either by a devaluation of the currency or by a total write-off. Schumpeter could not bring himself to contemplate the latter step because of its effect on the banks and the special assurances that had been linked to war loans. But later when the bank he joined after leaving the Finance Ministry collapsed, he ruefully admitted that l had been right; and added with irony that all he had left now was his mother's assets that had been left under my management. He was not alone in that position: a whole series of individuals who publicly attacked me then confided to me either their own or their family accounts.”
- Felix Somary’s memoir, The Raven of Zurich:
“I've been pretty vocal about not feeling that there is anything to disclosure because I don't feel there's anything to disclose.
I have stated that I do not believe that any government has crashed discs or alien bodies? They don't have any of that stuff. Why would they? Why would they have it any more than we do? I don't believe that they know anything more about extraterrestrial life.
For me, the equivalent of if the government suddenly said, we have a department of the afterlife and we have a hangar full of ghosts.
But we can't let you know what the truth is. It's like these things aren't physical enough and are not experienced in that way. The people who have these UFO experiences, they become psychic experiences very quickly.
They're quite clearly not 100% physical all the time.
Now, if a thing is not physical 100% of the time, it's going to be pretty hard to have it in a military lab and then show it to someone who then blows a whistle.
You can have something in a lab that you show a person and tell them something and they believe you, and now they feel they have something to blow a whistle about.
But did that actually come from outer space?
Hey, that's anybody's guess. Here's what we do know.
We actually do know that there's been disinformation campaigns, and some of those disinformation campaigns have involved trying to make people believe that the government knows more than it does at any given point.
So, so far, that's the only thing we know for sure.
So if that's the only thing we know for sure, and if you follow that logic outward and say, well, if you were a government, and if part of your existence depends upon control of your people and. And you're standing among other governments, wouldn't it be better for you to secretly imply that you know something, even if you don't?
And wouldn't that story sell better if you came up with a way to provide information to people who would then become knowing or unknowing whistleblowers, that, to me, interesting in a very human way, makes a lot of sense and doesn't involve any crash discs or any alien bodies, that is what I suspect is most likely going on.”
Thanks for the shout out (and for watching!), Rudy
Bless you sir, out here doing God's work for us all.