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Stanley drunken Miller warns that this short covering rally and AI hype feels like 2021 why soft Landing is a myth in 2023 as deflation will crash the stock market in July all those factors that cause a bull market they're not only stopping they're reversing every one of them we're in deep trouble said drunken Miller sorry gamblers the AI hype that has gripped the stock market is premature and the bubble will drip out bursting the leakages around every other sector cooling for the summer because deflation will crash the stock market like a cold-hearted polar bear is there too much hype for chat GPT I do think there's thick froth and you'll see a lot of these AI stocks come down after around 200 percent pump year to date really feels like we are circling badge in 2021 back to normal vibe in this market guess what aaii investor sentiment shows right now the same rope-a-dope took place in late 2021.
Bulls like Financial education Jeremy told each other that everyone is too bearish and they all loaded up on risk at the same time too bullish to realize they are everyone the problem with the world is the intelligent people are full of doubts while the stupid ones are full of confidence why drucken Miller will be stunned if deep deflationary recession won't come this July why soft Landing is a myth why QT will be truly activating pain signals this summer hi bond billionaire investor Stan Lee drunken Miller believes the Federal Reserves attempt to quickly unwind the excesses it helped build up for a decade with easy monetary policy will not end well for the U.S economy the legendary investor who has never had a down year in the markets fears it could be something even worse I don't rule out something really bad inflation is supposedly on its way to Falling gently back to two percent like a fluffy snowflake while the U.S economy Roars ahead or at least that is what Wall Street needs you to think however the U.S economy is in the eye of the hurricane right now and the other outer eye wall is approaching as the storm is intensifying the soft Landing myth which will have the FED cutting rates in the context of a healthy economy will be busted that is fiction without any basis in logic the conditions necessary for a change to looser monetary policy would not be extent given the current record low unemployment rate and growing GDP we would need to see inflation plunged towards the two percent range but that would likely only occur if the labor market was faltering along with eps and GDP to this point GDP increased at a 2.9 percent or in fourth quarter the unemployment rate fell to 3.4 percent while the ROC of inflation slowed from 9.1 percent in June of last year to 6.5 by December hence there exists the current hope that inflation will slow to two percent while growth remains strong however the road from six percent inflation to two percent or even three percent will be much more difficult given the stickiness of wage inflation which is currently up five percent year over year and oer will not be falling nearly as quickly as good sector inflation the reality is that real GDP increased by just 0.8 percent for all of last year that is if you believe CPI increased by only 6.5 percent so in truth the economy is not at all that strong right now in real terms after you factor out inflation but Powell is still convinced that GDP is strong China reopened a few months earlier than predicted and that led to a flurry of enthusiasm about the Communist Nation pulling economic growth out of the ditch China did indeed pull the global economy out of Crisis during the Great Recession it did this by increasing debt from 143 percent of GDP in 2006 to over 300 percent today but in the process of taking on the greatest expansion of debt in history China created a massive misallocation of capital and a humongous fixed asset bubble China's economy is now so unstable that it cannot undergo anything close to the same process that boosted Global growth 14 years ago the pboc injected the equivalent of 581 billion dollars over past two months in preparation for the reopening clearly that pace of stimulus cannot continue without creating Runway inflation and a U.N currency crisis let alone rescuing the global economy most importantly China can only reopen once therefore the growth impulse will Peter out over the course of the next few months the treasury Department is offsetting QT by emptying the treasury general account at the Fed the treasury Park's money at the Fed sort of like Banks Park excess reserves the money lays follow and is out of the economy but can be drawn out by the treasury during times of emergencies like now due to the U.S hitting the debt ceiling secretary yellin cannot issue new debt only roll over expiring debt therefore she is tapping the TGA which is adding new money into the economy a type of QE that is for now offsetting the fed's QT program but the TGA will be tapped out come June so this boost to the money supply is short-lived all of this is why last week's short covering rally was one of the most significant on record so what is the setup now the bottom line is that the U.S economy should be in a recession by the second half of 2023 to re-emphasize why the soft Landing BS is a myth China will be fully reopened in q1 and they cannot reopen twice the treasury general account at the FED will need to be replenished and that will exacerbate the 95 trillion dollars per month QT program at the Fed come June it will be QT on steroids we will then be left to endure the legged effects of the most coordinated Global tightening of monetary policy in history that took place over the past year which has yet to fully economic growth and EPS but should absolutely do so by the end of Q2 the yield curve continues to sink further into inversion it is now the most inverted since 1981 which presages not just an ordinary recession but one that is extremely transient the cost of capital for zombie corporations and consumers has surged over the past year this will cause massive layoffs from the 20 percent of listed companies that need to issue new debt just to pay interest on existing obligations the plethora of hiring freezes and layoffs announced over the past couple of months will begin to greatly inhibit consumption and The Battered U.S consumer two-thirds of whom are living paycheck to paycheck and have less than four hundred dollars in their savings account should begin to shut down consumption the economy will also be struggling through a Fed funds rate that is struck above five percent for a long time most importantly the great Cascade of the base money supply and the Fed Credit should cause Bank lending to begin to seize up and cause chaos in the credit markets the coming recession will push the current mile decline in EPS into significant plunge of course this will eventually lead to a genuine fed pivot but it will come in response to an equity market crash and credit Market freeze not ahead of one unfortunately this means Powell will pivot before inflation has been dead and buried which in turn means the next inflationary cycle will dwarf the previous 40-year High battle fought in 2022 to 2023 for those 60 40 Buy and Hold investors these inflation to deflation boom and bus Cycles will grow more intense and more destructive over time you don't even need to talk about black swans to be worried here to me the risk reward of owning assets doesn't make a lot of sense drunken Miller said but for those fortunate to have a robust macro economic model it provides opportunities to outperform the market join my patreon to see my every money move in the market and this is my book time and rainbow Focus another one of my books
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