Apple Blossoms of May, Give way to Economic Hurricanes in June. 2022 is looking harsh. Hang on to your hat, your health, your wealth, and your weapons. Our research suggests: "Yur gonna need'em..."

Federal Reserve in USA, raises administered interests rates 3/4 of 1 percent, on June 15, 2022, which is actually quite a lot, given that Federal Reserve rates were effectively less than 1 pecent. Bank of Canada will do something similar, quite soon. Rising rates and shrinking money supply, will not do anything to bring forth more oil, gasoline, European gas, American baby-formula or low-priced electric cars. It will lower the price of housing, by whacking the equity existing home-owners have in their homes, and it will raise borrowing costs for all governments - which will translate into higher taxes, and poorer consumers. This will push up wage demands and increase costs to households (mortgages will be up-priced), and this will be (surprise, surprise) inflationary, so the algorithm to FIX the INFLATION will actually CAUSE MORE INFLATION. (I actually know a fair bit about this, as it turns out...)

Yes, rates needed to move back into a range of sanity - but we should also end the Big Stupid Russian War in Ukraine, by any means possible. The UN and it's idiotic "Security Council" have dropped the ball, because the invasion of a sovreign nation has been carried out by Russia, a "Security Council" member. We are back to the "League of Nations" foolishness, where the whole process to prevent abusive actions by powerful nations, cannot and does not work. We seemed to have learned nothing from the 20th century violence and crazy-bad behaviour of nation-state entities. We - all humans on Earth - will have to re-design the nation-state system, since it does not really work in a sane and rational manner. The idiocy and absurd cruelty of Russia's actions, will poison our economics - and our future - until we correct this terrible, wrong situation.

This will hammer all our economics, in every nation, until we get this insane and ugly problem fixed. Mark my word on this.

This idiotic and cruel Terror War, is the Blackest of the "Black Swans" - even worse than September 11, 2001.

Quick-Economics - The Tale of Two Pontiacs: This is the 1972 Pontiac LeMans that I had, back in the late 1970's. This car was a real metal magic-carpet. This was a black-and-white image which I printed from an Ilford-film negative, shot using a Nikon F2 35mm camera, and printed using a surplus Czech enlarger on Ilford paper. I made a digital image of my old photograph last week, using a Huawei-Android cellphone.

This Pontiac really was a fine car, and quite fun to drive.

Analog photography, using 35mm Leica and Nikon cameras, prints made with image enlargement, then developed in trays of chemical liquid, was a wonderful thing to learn. It took a bit of work, but you ended up with real artwork. I still have this 8x10 inch paper image, and because it was made properly, back in the 1970's, the framed image remains clear, and I can hang it on a wall and still admire the artful lines of this old silver Pontiac. The car itself doubtless is long gone, but this image, which I made on a warm summer day, 45 years ago, remains. And now it lives in digital form, and I own this image, and assert my copyright of it.

(If you have never done real photography, developing your own negatives, and printing the image blow-ups yourself, you are missing something quite magical.)

If you examine the next picture, which is the last year of Pontiac production, for the "Firebird", you can see the artistic & stylistic lineage of this iconic automobile. From a economic & technical viewpoint, this was a high-point of the North American automobile industry. From 1973 onward, the cars got worse and worse, as engines were substantially and seriously de-tuned, to meet increasingly stringent emissions restrictions. From this point on, the cars were basically designed by lawyers and government regulators. Performance, styling and quality went rapidly down hill, for roughly a decade, until computer-controlled engine management technology became practically available, and engines could be dynamically tuned, and expensive catalytic converters could be used to meet emissions restrictions. The purchase price of this car was roughly $3680 and change (I still have the original sales brochure).

Here is an example of the best Pontiac Firebird ever made. It has an LS1 V8 aluminum block engine, which puts out over 300 horsepower (roughly 320 hp). This real-wheel drive car came equiped with "traction control", to reduce the chances of losing control, if too much power was applied. One can see the stylistic similarity to the earlier Pontiacs, especially to the late 1960's and early 1970's Tempest, LeMans and Firebird models. The Pontiac division was terminated by General Motors, and this 2002 Formula Firebird, is the last year of Firebird production.

The Pontiac performance cars were some of the most attractive cars that were ever built in North American, in my humble opinion.

Good technology, good design, good ideas - these are born, created, developed, implemented, enjoyed - and then they end, often with tragedy and collapse. This is how history, economics, business, ecology, and evolution all work. The automobile industry seems to be beginning to collapse. But maybe not. Do you want to ride on a train or a bus, while everyone is exhaling toxic virus droplets? Of course not. Cars will live as long as people remain.

Purchase price of this 2002 model year vehicle was 39,379.80, minus a 1000 manufacturers rebate, for a total cost (after tax) of 38,379.80 (I have copy of original Bill of Sale). This car was purchased new, by the orginal owner, in September, 2001.

So, with the LeMans at $3680, in 1971 (it was bought at roughly same seasonal time, the Fall), we have 2001 - 1971 = 30 years. The cars are roughly equivalent, and in fact, engines are both V8 design, and displacement is the same (350 cubic inches) and both vehicles have automatic transmissions. The implied rate of inflation is given by the formula for compound growth: P1 = P0(1 + i)**n where n is number of periods, and i is the in period rate of growth. 10.7 = (1 + i)**n, which implies i = .08224 (1.08224 ** 30 = 10.7079). So, we get an estimate of annual inflation of 8.2%, for the 30 year period, from 1971 to 2001, which feels about right.

You note that we are *not* using "hedonic adjustments", because these adjustments are bullshit - and every honest analyst knows this is the truth. It is only the folks who are being paid to write lies for their employers, who would argue otherwise. :)

This trivial analysis makes a key point: You need to be generating at least 8% annually, in returns on your investments, just to maintain the value of your invested savings. And this is not easy, especially when many supposedly "quality" investments end up either in the graveyard (eg. Nortel, Air Canada, General Motors, Stelco, Royal Trust - all traded thru essentially ZERO dollars per share at some point) or yield far less than the needed 8.2%. (Government bonds have traded less than 8 percent, over most of the period, and now trade around 1.5 to 2% yield.)

So, you have no choice, but to be a speculator, which of course, means taking on risk - and lots of it, typically.

Enjoy the ride! (But try not to crash out!)

Theme for the 20's: - Inflation - And The Destruction of Money:

This 1000 Kronen note was once a *lot* of money, then not quite too much money at all, then of course, it became just a historical item, with no cash value. In 1902, when created, it was 1000 Austrian "Crowns", quite a lot of cash wealth. By the end of the First World War, after the collapse of the Austrio-Hungarian Empire, it was just paper-stock, to be over-printed with that vertical orange image in the centre, which gave it a vastly deflated value in the new (bankrupt) Austrian state.

I had thought the woman was some royal princess or something like that, but she was just a pretty model. Except she has a special look on her face, doesn't she? It's almost as though she somewhat reflects in her expression, the abuse that the currency - and the curious "Empire" suffered - at the hands of the profoundly unwise politicians. History has much to teach us. Look at her face. She was trying to tell them something. Their world was in the process of ending, but they did not know it. She is not smiling. I think she looks positively "pissed-off", as we say (rudely) in the Anglo-Saxon English world. A female friend of mine, says she looks like a prostitute.

This note is perfect paper money. Her face, and that orange overprint, tells the story that the economic historians and the political scientists never want to tell us truthfully.

Everything ends, eventually. But the end of money and nation states, that is particularly disruptive. But it is the way of things. Economics is the science of scarcity, not a prescription for "plenty". And give enough time, it is a certain to occur. Attempts to overwrite or overrule the requirements of economic reality - such as "communism" or it's ugly little brother, "socialism" - have produced some of the worst national horrorshows the world has ever seen. Examples include fascist Germany and Stalin's Russia. Stalin arranged for the murder of over 1 million landowners and farmers in the Ukraine, in a horrific and misguided attempt to "improve" Soviet grain production. What it was, was simply an exercise in land-theft on a grand scale. Nazi Germany and the Soviet Empire were very similar entities - each trying to re-write the rules of economics. To do that, they had to commit crimes on the scale that only nation states can engineer.

But if we look back in history - we see this is the norm.

When a nation's money dies, it is because a corrupt government took explicit action to kill it. This is something we should all understand. When money dies, soon after, the people will begin to suffer the same fate.

This is why economics matters, and why there are so many clever lies created - almost all by nation states - to cheat and mislead people about their money.

This is $226 TRILLION in US Dollars - real money. Honestly and truly, there is absolutely ZERO chance that this debt will be paid back with currency that has any sort of real value. We have jumped almost 30% in one year - and for a minor pandemic that has killed 6 or 7 million people - by historical standards relative to global population, a very small number. What if we have a real emergency? (Eg. 50 to 500 million dead - like the 1918 Spanish Flu death rates?)

Interest rates - short term - in USA and Europe should be raised *immediately* to 3% or more, right *now*. The alternative is to tee-up all the pre-conditions for an out-of-control runaway inflation, and to further seriously destabilize the global economy.

The USA just effectively removed any *debt-limit* to their fiscal spending at the Federal level, and the Federal Reserve (the USA Central Bank), is still buying bonds with "computer-fabricated" cash (faster and better than Germany could do it in the 1920 to 1923 period), and they have no plans to lift interest rates off of zero, until sometime around the second quarter of next year, and then, only 25 basis points.

This is just nuts. But you can see the problem - the IMF folks quietly point out that you risk blowing up the world if you lift interest rates any amount at all.

This entire planet is running it's financial systems on funny-money and absurd levels of debt. And with nothing more than 30% in-year changes to these already-insane levels (which we are already now seeing), we have a very simple (yet very robust) economic growth-equation model, that suggests we are right at the "tipping-point" of a full-on chaotic collapse-event.

I can say with a probablity that approaches unity, that this economic madness cannot go on much longer, without a big breakdown occuring somewhere in the deeply interconnected global financial system.

The longer this nonsense continues, the worse will be the eventual reckoning. The governments of the world cannot and will not raise interest rates, because they know if they do, they will not be able to pay the interest on any new bonds sold, without there are massive tax increases. And the tax increases, combined with the increased interest-rates (increase costs to service debt), will just suffocate economic activity, and force economic growth negative.

We must raise interest rates to sane levels (so that savers and investors can earn money without taking insane risks), and reduce the out-of-control government spending that is fueling this madness.

We suspect we are already past the point of any sort of "soft-landing". But before we can fix anything, we need to first stop the out-of-control spending insanity, and act to limit the already accelerating inflation. But we see absolutely *no* sign of this happening anywhere. Governments are still in *expansion* mode, financing their actions with what are basically the junkiest junk bonds ever minted, and telling the Central Banks to ignore their traditional prevent-inflation mandates. This is just absolutely nuts. The Central Banks and their governments are explicitly programming-in high-risk of a non-linear system-collapse event.

Good-night, Vienna.

The Rise of the Middle Ground: This is an interesting trend we have noticed. Years ago, we bought a bunch of shares in a Middle-Province Telephone Company, that was eventually acquired by a big national telecom. It was a silly-good trade, with the smaller telecom paying roughly 5% in dividends, while we waited for it to be acquired at a big premium - which happened, because it was an attractive, "Middle Ground" property. Note that how the successful, low-unemployment regions are *NOT* the "bi-coastal" Democrat-voting, high-Covid death-rate regions. The worst-hit areas are of course, Californistan and New York - with it's very curious history of awful Democrat Governors.

But the Middle Ground is doing very well. It is not "Fly-Over" country any more. More like the "Run-To Lands."

The California-NewYork Axis still controls most of the wealth and political power in the USA - but this little map shows how things are changing at the margins. Both New York and California are wildly-expensive places to live, and we expect to see declining rates of economic opportunity in both of these historically economically dominate regions. Their power and wealth will continue to dominate for quite a while yet - but we suspect the Middle Ground will show more interesting opportunites, as we move into this not-so-brave new world.

Inflation is not some "future fear" thing. It is a "here-right-now" reality, and for actual business and consumers in the self-financing real economy, it is certainly higher than the official rate of 5.4%. The Central Banks will have to raise rates *sharply*, and do so soon, before this gets out of control. We wonder if they will be able to do so, given the toxic and dishonest political environment that prevails in the USA.

Sometimes, we need to stop and reflect, rather like sunlight on a calm northern lake, just how profoundly fortunate we are here. If you look careful into nature, you can see the fine truths that can allow for astonishing prosperity to be fabricated by human effort.

But we also need to understand the fine and perfect beauty of our legal systems based on honest Roman law, and correct systems of land-tenure, with fee-simple private property ownership. We stand now at the working end of over two thousand years of system development of civil society. We are lucky to be here, with this model.

One of the few things we can see with clarity and certainty, is the horrific and tragic failure of "communal ownership" of property. Private property is the single greatest invention of humanity - equal to that of civilization itself.

Without private ownership of land, there can be no civilization. The world collapses immediately into feudalism, warfare, and extreme, violent tribal conflict. The greatest invention of our culture was the land registry office, which documented who owned what property. The very earliest Roman written records, were maps of field ownership cut onto a large stone. Agreement about land ownership was the canonical primary task of civilization. Once a common record existed, it was clear who owned what, and where. This prevented conflict, and allowed small-holders to create surplus wealth - both for themselves to survive the winter, and for the State to storehouse to prevent famine. Taxation rates were typically 1/5th of production - sufficient for civil management of surplus, but also small enough so that most yield was left in the private hands of the producer.

This is the only correct model for civilization. We deviate from it, at our own great peril.

Land-ownership map records actually pre-date Rome, and are found in all civilized cultural contexts. Land registry documents recorded on fired clay disks, have been found from early Babylonian civilization, circa 1800-1900 BC. In 1895, Vincent Scheil found one, and it is on display in the Archeology Museum of Istanbul, in Turkey.

Technical details: https://cdli.ucla.edu/search/search_results.php?SearchMode=Text&ObjectID=P128359

Image by Dr. Osama Amin: https://commons.wikimedia.org/wiki/File:A_cadastre_text_written_in_Akkadian._Terracotta_tablet._18th_century_BCE._From_Sippar,_Iraq._Ancient_Orient_Museum,_Istanbul.jpg

(Go to the Sept. 24, 2021 log entry, and the above links are hot, so you can just click on them to jump to see images.)

Houses Built on Quick-Sand & Money Falling Down

This is a snapshot of my "Lehman Bros." archive, which I pulled out of the files, just to image this. We hope EverGrande does not cause this ugly level contagion, and our view is that it will not. Lehman was linked to everybody, and they were hard-core liars. Their balance-sheet seriously misrepresented the financial condition of the Lehman Brothers enterprise.

Dec. 16, 2021 - Maybe Next Year? - The USA Federal Reserve has decided not to raise it's short-term interest rate, and has kicked the can down the road to middle of next year.  Rates are to be kept at essentially zero, and a runaway inflation and asset-bubble will be both sustained and inflated further.   This is madness, but it is being reflected in the unwise policy choices of most western-world governments.  In Canada, the Central Bank has been given explicit instructions to focus on job-creation and reduce it's traditional "prevent inflation" role.    This is profoundly unwise.

By next year, the inflation-process will be firmly implanted in the public's economic mindset, and we risk an ugly repeat of the economic collapse-events that characterized the negative-growth, high-inflation 1970's, a time in which it took 20%+ interest rates (in 1980), to damp-down the runaway inflation which had rapidly developed.

Our governments are run by liars and fools, and we shall face an ugly reckoning because of this, within the next two years, our research suggests.

Nov. 25, 2021 - Bubble Up - We are in the Mother of All Bubbles, I suspect.   There are few simiiar conditions in history - one has to look at the Spanish inflation that resulted from the shiploads of looted gold that the New World excercises in plundering offered the Spanish monarchs, or the Weimar Germany inflation of the 1920 to 1923 period.    Accurate data on both time periods is difficult to acquire.   To say we are worried about this, would be an understatement.

This will go down in history, as the time of no sleeping, I suspect.  It is almost certain that this Covid virus was lab-created, and it's release, an ugly accident, involving mice which roamed between the Wuhan labs and the live-animal market. 

We got our influenza vaccine shots a few days ago, and I was fine for days after - but I visited a Mall, and the Apple Store, and I have caught something.  I am seriously ill, dizzy and breathing difficulty.   (The Apple Store is a crowded place - full of kids from all around the world.   Kinda like a biological ground-zero..)    

Oct. 2, 2021 - Money That's (Almost) Worthless - The inflation rate in Venezuela, year-on-year, has been 1,743% this year.  The economy is run by "South American Socialist Idiots", a curious species of human fools, derived from Spanish Catholic monsters, who invaded the place around 500 years ago.  The place represents a perfect economic laboratory.  It demonstrates what happens when you put complete idiots and criminally violent socio-pathic nutjobs in charge of a nation.  You get economic shit.

The Venezuela "government" (can you really call it that?), has "addressed" it's inflation problem, by dropping six zeros from their  currency - called the "Bolivar".  So, if you had 1 million "Bolivars" last week - (oh!  you were a *millionaire*!) - today, you have: One.

https://www.reuters.com/world/americas/venezuela-subtract-six-zeros-currency-second-overhaul-three-years-2021-10-01/  

I think the Reuter's reporters have trouble writing this story, without giggling.  Venezuela is a perfect textbook case of what *not* to do.  Perfect "South American Socialist Idiots".  SImply perfect.  Listen to them babble in their strange Spanish.   The only thing they make for export, is bad TV shows and oil.  I heard they even nationalized the Kellogs Corn Flake factory.  Oh, that should help!  Your breakfast cereal is now made by Government workers.  Mmmm.  

It's like a perfect model of perfect economic failure.  Really, quite an interesting economic experiment. This level of inflation is *not* the result of US mandated economic sanctions.  Their failure is the result of *Socialism*, one of the great political frauds of the 20th century, as Communism was of the 19th century.    Political fraudsters are always inventing some typical gangster scam to steal wealth and fill their own pockets.  But better use Bitcoin or Gold, Maduro-boys, (or US dollarubles), since your own currency is being "marked down" at a pretty fierce rate. 

Meanwhile, "official" inflation in the US is running close to 4% (But anyone who goes shopping knows that the prices are sure rising faster than 4% annually...)

https://www.reuters.com/world/us/us-manufacturing-expands-further-september-shortages-prices-rising-ism-2021-10-01/

So, things are starting to get pretty bubbly - but there are also real shortages and prices rising just to allocate scarce stuff.    We are finding it curiously difficult to get some specific, high-quality things we want to acquire.  There are acres and acres of stores filled with shit and crap and cheap plastic junk garbage.   But try to find a quality product that you used to use, and want either more of, or another copy of, and you find often that it is simply not available.

This is curious.   But that also induces price-rises.

So, we see moderate to serious inflation in the future, since it is accelerating now.

Sept. 20, 2021  - Evergrande China.  Sad and bad.  It would be best, if they do not default.  But since "fee-simple" land ownership is not really possible in China, then it looks like everybody has a problem.   There is maybe no real market for their "real-estate" assets, because maybe these do not even exist.

Since it appears that Xi wants to maintain the "North Korea" land-tenure model in China, then Evergrande maybe has no assets at all.   This is a problem.  The whole Company may be just an air-bag.  But it is their problem, not ours.   You only have a problem, if you are holding Chinese paper - you think.  But maybe your bank or your pension fund, holds this paper.  Eweh..  Yuck...

Reuters has a good summary of this particular shit-show:

https://www.reuters.com/world/china/china-evergrande-shares-plummet-default-risks-2021-09-20/

Personal and corporate integrity - the ability to trust the guy you do business with - this is the key to success or failure in the commercial world.

There are these places in the world, where the people just do not get this concept.  It is just not something inside their little heads.  You can have lawyers write a million lines verbage into contracts, but it all comes down to trust.  You loan some guy money (by buying his paper), and you have to know that you will be paid back.  If the bastard defaults on you, it is mostly his problem.  You will lose money - but he loses his whole soul.  He forfeits a life of honour.  He loses his spiritual manhood - his very life-force itself.   He becomes just another biting insect on, or cancer-cell in, the great body of the world.

He who does not pay back what he owes, is a worthless and ugly error-condition, in the machinery of reality, like a radio-active leak in a school, or a dead-rat in the baby-food.

Is Evergrande the 2020's equivalent of Lehman Bros.?   We don't think so.  Lehman had that whole "clever New York guy" thing going - they had this myriad of multiple entities under the "Lehman" name - all different little orgs, - and they figured they could bankrupt some, and keep others.  It's a crooked-prick trick, that lots of sad/bad boys try.  

You cannot invent racial pictures to characterize these folks, else you will just be make more errors.  It all comes down to how you respond to the misfortune of a reversal.   The Jews would get unfairly treated, because they loaned money, and expected to be paid back, and folks would try to cheat them, and invent reasons why they did not have to honour their contracts.  It's not that Lehman were Jews, it's that they were bent assholes.  And those come in every culture and race.

The stench of dishonestly and the dishonour, attaches to the defaulter.  It smears the family or company name with shit, if you try to do stuff like this, and use the bankruptcy laws to avoid paying your bills.

No-one will want do business with a shit-stained defaulter.  

You should not default.   You should pay what you owe.

When you are running a business, you must ensure you maintain both financial and moral  integrity.  It is such a simple concept - but like "common sense", it gets brushed aside by a curiously large number of rather low-quality people.

We really hope the Evergrande collapse does not damage the global economy.

Right now - every financial regulator, should require every public company, to indicate if and to what amount, they are exposed to this sad Chinese shit-show.

 

Eg: Central bank reports, Economics research results, Market Price charts, Alcohol consumption, Kiedanren, M1, M2, M3, No M at all reports, Drug usage by non-drug users, Beetle-juice, Bit-coin valuations, Cloud and SAS bytes of storage, bites in the carpet, bites in the bedroom, Zoom calls received, Zoom usage, No Zoom at all stats, Air travel statistics, Hotel occupancy rates, Factory utilization rates, alcoholism rates of business owners, Business Failures, Divorce rates, Crime rates, Suicide rates, Extreme Horrible Awful Events that Cause Politicans do Deeply Unwise Things, Employment levels, Unemployment rates, Number of folks staying home and doing bugger-all, pretending to be working and drawing big salaries, folks drawing no salaries and all and wondering what they are gonna do when the bills come in, National accounts, Wars fought and lost, Hours wasted on internet, and Percentages of one's life lost forever.

Kim Kagemusha of North Korea. Meet the new "boss", not at all the same as the old "boss", although some folks have worked hard to make it appear otherwise. The only times in history, when you really need to have a "Kagemusha", is during wartime. Does this simple observation tell us something?

If we have a small nuclear war, this will affect the Q4 global economic parameters, we suspect. :)


This is the title page from one of Dr. John Lettsom's books. Lettsom was an absolutely astonishing man - at an astonishing and crazy time in history - much like our own. My own research suggests he was rather like a British Colonial Benjamin Franklin - and in fact, Lettsom and Franklin were close friends. Lettsom founded the first "Medical Society of London" in 1773, where he brought together various medical specialists - physicians, surgeons, apothicaries etc., in an attempt to encourge inter-disciplinary communication, so as to advance the practice of medicine, and get it out from the bloody dark ages of infection, superstition and religious quackery, where it was often sadly mired.

Check out the book's sub-title.

The man was also a serious entomoligist (insect scientist), and this book shows the quality of what he produced. He was also an abolitionist, and his first act upon inheriting his father's plantation in the BVI, was to free all the slaves it owned.

The time period in which he lived, was one of those extreme, unique inflection points in human economic history, where political-economic change raced across the globe. Science began to produce real results, and religious nonsense was being put on the back burner everywhere, despite all the god-blather and religious fighting that still took place. It was a time, much like our own, and the study of persons like Lettsom, offers much insite into our own curious economic world - like Lettsom's, also beset by airborne disease, ignorance, and a rapidly growing economic engine which was driving positive change.

An example of a Japanese "Shunga" (Springtime) woodblock print, from the 18th century Edo period. These were illegal when they were made, and so the artists typically did not attach signatures to these images. What is interesting is the high production quality. Despite being illegal, these pornographic images from the 1700's appear to have been wildly popular, given the number and variety of them that have survived.

The more we study - the more we realize that very little that happens is new. The cycles of human action seem to repeat endlessly, as do the cycles of many natural processes, from the rotation of the earth, to the orbits of the planets, to the rotation of the spiral arms of our galaxy. Lake levels, empires, and markets rise and fall, the weather is clear and then cloudy, warm and then cold and human behaviour shows a remarkable self-similarity over time and across various cultural configurations.

These images were very popular entertainment, and like the "manga" and internet TV and Youtube of today, were a serious money-making business, it appears.

Seems to be the image for Economics in 2021. Death and the Devil, trying to knock us off course. Hold on to your spear, keep your lucky foxtail tied to it (or whatever talisman you prefer), and keep your focus on the road ahead. Don't get distracted.

This image is Albrecht Dürer's famous "Death, Knight and the Devil", detailed engraving from 1513. This work is typically considered his masterpiece. Many people have generated many interpretations of this image. For me, it is very clear - Dürer was characterizing the ideal we must aspire to - we must be like the Knight, and ride thru horror, and the sad truth of life (that quickly brings death), and be resolute and not allow ourselves to be pulled down by fear or even by the certain knowledge of the futility of most of what we do. The city on the hill in the distance - either the Knight's origin or destination - in matters not - is what we are constructing. We must be stoic and focused - like the Knight - and ride thru the dark forests of painful knowledge, and supersitious ignorance - with our gaze directed always forward, so that we are driven by our own inner fire. Both the Knight and his dog move forward - the Knight is not distracted by Death or the Devil, and his good and loyal dog, is not distracted by the lizard.

This is probably the most important artistic image ever created on this planet. It speaks so clearly to the true nature of reality, and indicates *exactly* the best and most noble human response to the reality that surrounds us all.

Curiously, I just discovered this image, while researching the images on the German 1922 10,000 Mark bank note. The image on that note, is "Portrait of a Young Man", by Dürer. I am embarassed to say that I had almost no knowledge of this incredible artist - clearly one of the very greatest artists that ever lived.

There is a pretty tight connection between Economics and Art - as both Artists and Economists will doubtless agree.

This the trading-price of a synthetic (well, so synthetic it does not exist, except as a simulation - a randomness experiment). This fake price chart was created by the little APL function below it, as part of an experiment in randomness assessment. Note the perfect "Elliot Waves" and the beautiful "head-and-shoulders" pattern. This research has honestly quite rattled me. The "price movement" patterns that this simple randomness experiment yields is surprising. This simple simulation starts with an IPO price of 70, and tracks forward for 5000 periods (this might be thought of as roughly 20 years of daily price observations..) to reach a price of 115 and change.

I seed the ⎕RL (the start data-point of the pseudo-random number generator) with a times-reduction of the last four elements of the timestamp (this multiplies the hours, minutes, seconds and milliseconds values together, and that big number is used to start the pseudo-random number generation.) Then, we generate 20 random numbers between 1 and 20, and take the first one, subtract 10.5 from it, multiply it by 0.1, and add that to the last price, to get the next price.

What is so interesting is the runs and patterns that this simple random model generates.

It creates charts that *REALLY* look like stock prices, and have *ALL THE TRADITIONAL TECHNICAL PATTERNS*. I've run hundreds - and the number 10.5 was critical - at that value, the trends will either move up or down - and sometimes sideways. If that number is any different, you will get charts that show consistent trends either up or down.

This was a favourite chart, as it has a perfect "Elliot Wave" (with a little Elliot in the primary 3 to 5, of the first main wave), and also a perfect head-and-shoulders, followed by a price breakdown, a period of consolidation, and an impressive (and rapid) recovery, right around the middle. The recovery fades down to the second Fibonacci, and then begins a trend-channel style climb up to 125, at which point the price breaks down to around 107, but then stages a recovery right back to almost 125, where and when it breaks down, and begins to form a "pennant".

Seriously, this whole thing came from the little APL program below, with the pseudo-random values from the library program inside the GNU-APL.

This chart - with all it's technical patterns - is a complete head-fake of randomness.

I am a bit surprised by this.

Is market-price action really random? Are we all just getting lucky? I've read "Fooled by Randomness" and hundreds of other books on the great "efficient markets" debate - but this little APL program really brings it home. We *know* markets are sometimes not very efficient at all. But yes, I think we also generally underestimate the awesome power of the rolling-dice. God does not *roll* dice. God *is* the rolling-dice. That's all that's needed. The rolling-dice, and a few simple rules, and a system with memory from one period to the next - and you can create the entire universe, given enough rolls of the big dice. This is the truth, regardless of how it makes you feel.

50 Years of Canadian Inflation - the Core Canadian CPI, from January 1971 to January 2021. Core CPI excludes 8 high-volatility items, including fuel prices. But it catches most of the pain. Do you see a trend here? The bottom X-axis is just an index vector of the 601 monthly datapoints, with June 2002 (index position 378) being equal to CPI index value 100 (when the CPI was "re-based").

One can see, it is around index position 140 (August 1982), when Canada's inflation curve shifted from being an exponential growth curve, to a linear growth regime. It took interest rates of 20% in the early 1980's to make that painful but necessary transition. But it worked.

What makes the most recent inflation numbers interesting, is that the Core CPI number for December 2020 was 135.3, and the number for January 2021, has been revised upwards (sharply), to 136. That does not seem like much - but consider - it is 0.7 % change. If prices are really tracking upwards at 0.7 % per month, then that implies an annual inflation rate of over 8%. And that actually feels about right. We - here in Canada - are seeing *hard-core* prices increases for *everything* - especially food and groceries. There are imported items which are unavailable. Gasoline is back over $1.21 per *LITRE*, which is jump of almost 20% from last years price. And of course, this is happening just as incomes and returns for conservative investors are being hammered.

Note the logarithmic growth of this curve at the first part, which corresponds to the first "Trudeau Years" back in the 1970's. There is every indication we are setting up a second similar scenario under the leadership of his offspring.

What is deeply concerning, is the way equity prices performed in the 1970's. Stocks are often thought of as an inflation hedge - but the data shows that stocks do not like inflation, and tend to drift lower or at best flat-line. Some analysts refer to the ugly inflation-impacted markets of the 1970's, as the "silent crash" that was not seen as being as harsh and brutal as it actually was. The Dow Jones Average moved from the 1000 level, down into the high 600's, and the drop was attributed to the (*accurate*) view that many had, that inflation was seriously distorting the economic operation of many industrial sectors.

And note: Historically, bond prices tend to turn down *before* stock prices do. The rising yields we are seeing now, suggest that the equity markets are nearing or at a top. Of course, anything can happen, and no one can know for sure. But we caution that inflation is a deep, dangerous and pathological economic phenomenon - vastly worse and more destructive to financial assets, than is deflation. But the nation-states and the central-banks are serious hooked on the need for inflation, to keep the economic engines humming, the noses to the grind-stones, and the lab-rats on their running wheels. For salary-men (and women) and government workers, inflation is part of the game. But for investors, it is a silent, often almost invisible, economic equivalent of a toxic poison that kills portfolio values as it destroys the value of wealth set aside in youth. Central banks should aim for *zero* inflation and positive, stable interest rates. But the poor confused lads have somehow got this concept backwards.

If this curve jumps back to the regime that it shows evidence of in the first 50 or 60 datapoints, then we are all in very big trouble. And we here with our little computer models are having trouble figuring out any sort of viable scenario where this does *not* happen.

[GEMESYS Ltd. Chart created using GnuAPL, directly from monthly Core CPI data from Statistics Canada webpage: https://www150.statcan.gc.ca/ ]

This is one of the more useful, somewhat under-the-radar indicators we've noticed. When markets are *really* frothy, it tends to get down around the levels we are seeing now - just like it did back before the year 2000 first Dot-Com market meltdown. Interesting now that the whole world is now aware of this useful data-series. We have an associate - an old fellow who makes money consistantly - who swears by (not at!) this indicator. This chart was lifted from the Reuter's news story, URL below on the Feb. 19th, 2021.

107.9 million pounds book value. Divide 107.9 by .212012 (all amounts in millions), and you get a book value per share estimate of 508.93 pounds per share. So that 775 pounds per share price from August 31, 1720, divided by 508.93, works out to 1.52. The "South Sea Company" was just a big bank, and it was selling at roughly 1 and 1/2 times book - which actually is pretty much about right. So this is hilarious - the "Irrational Bubbles" of history may not have been quite as nutty irrational as historical hindsight suggests. The entire "South Sea Company" project was simply brought down by a trans-national liquidity crisis - a whole bunch of other bogus and not-so-bogus company's stocks went hard south, when the crazy-greedy British Parliament passed the "Bubble Act of 1720" and started enforcing it in August of that year. The whole "South Sea Company" was actually not as extreme as it appears at all. One and a half times book value - that is generally seen as a reasonable valuation. Private business entities often turn over at twice book - just like the peak price of the South Sea Company (just over 1000 pounds per share). But once liquidity dried up, everyone who had speculated had to rush around and raise cash. What do you do? You sell assets - and the best stuff you hold, will typically fetch the highest price, so that tends to be what gets shifted first. What we are looking at here - with Global debt running up the way it is - this is way worse and more bubble-crazy than any of the historical bubbles ever were. See, it is clear as shattered glass that this debt above will never be paid down with real money. Some sort of scheme will be required to bring the Big Global Money System back into balance, we suspect. John Law's use of "rentes" was interesting. Everyone views his scheme as a great fraud now - but seen thru the eyes of the Government of France, it actually worked out pretty well, and reduced French national debt to a fraction of what it was before he tried to monetize it all. All these big debt-management schemes require some method by which the debt is made to be "securitized", sold off to wealthy folks, and the the securities discounted in value down to a much smaller number. Some folks will get left holding a very big bag, we suspect. But if the "Bubbles" in history were not really what they seemed - then what the heck is this? What we may have here, is really: "The Great Bubble" - an actual, real bubble that may provoke the greatest rush for liquidity ever seen in all of human history, when it finally collapses. What could cause this? Maybe USA simply repudiates all the USA debt the Chinese hold? Or a small nuclear war begins, several cities taken out, and then reparations have to be paid by the loser? Or a virus that kills like the 1918 Spanish Flu did (roughly 1/2 billion would die now). Something will have to break, somewhere, we suspect, if patterns hold. The resulting response then provokes a liquidity crisis ("The Mother of All Liquidity Crisis Events?"), and national currencies are re-priced and re-valued? Floating exchange rates abandoned? Truly, we know now that really, anything can happen. " has-arrows="False">

The entire operation of the World is being funded with "printed" funny-money (no printing actually required - it's just digits in a computer now) and ramped-up borrowing. We suspect that the bonds being issued will almost certainly never by paid down with money that has any useful purchasing value. The numbers are becoming quite insane - regardless of how you look at them - as absolute US dollars, or as percentage of GDP of respective national economies.

I've been trying to figure out why this is making me so uneasy - and so I did a detailed review of three historical "bubbles" - or supposed periods of speculative excess. The "tulipmania" in Holland in 1637 was both negligable and probably justified - for the rare varieties. In any case, it caused no serious market harm. The John Law 1719-1720 experiment in France, with the creation of the Banque Royale succeeded in reducing the unsustainable war debt of Louis XIV.

The South Sea Company "Bubble" in England (1720), was actually quite a viable scheme, simply brought down by the Company getting Parliament to pass the "Bubble Act of 1720", which prohibited other joint-stock commercial ventures, and provoked a liquidity crisis that cratered the 775 pounds per share South Sea equity price on August 31st of 1720, down to below 200 pounds per share, by October of 1720.

But it gets interesting if you look at the numbers: The South Sea Company had 212,012 shares outstanding, and the Company had essentially purchased long-term Government bonds worth roughly 40 million pounds (at a long term 4% discount rate). Liabilities were 7.1 for the purchase of the annuities it took on, and 6 million pounds owed for bonds and bills. The tangible net asset value was estmated at 40 - (7.1 + 6) = 26.9 million pounds. The company had made loans of 11 million pounds, and was owed 70 million pounds by subscribing shareholders - who had bought shares on installment. So, 26.9 net asset value, plus loans outstanding & receivables of 11 + 70 => 107.9 million pounds book value. Divide 107.9 by .212012 (all amounts in millions), and you get a book value per share estimate of 508.93 pounds per share. So that 775 pounds per share price from August 31, 1720, divided by 508.93, works out to 1.52. The "South Sea Company" was just a big bank, and it was selling at roughly 1 and 1/2 times book - which actually is pretty much about right.

So this is hilarious - the "Irrational Bubbles" of history may not have been quite as nutty irrational as historical hindsight suggests. The entire "South Sea Company" project was simply brought down by a trans-national liquidity crisis - a whole bunch of other bogus and not-so-bogus company's stocks went hard south, when the crazy-greedy British Parliament passed the "Bubble Act of 1720" and started enforcing it in August of that year. The whole "South Sea Company" was actually not as extreme as it appears at all. One and a half times book value - that is generally seen as a reasonable valuation. Private business entities often turn over at twice book - just like the peak price of the South Sea Company (just over 1000 pounds per share).

But once liquidity dried up, everyone who had speculated had to rush around and raise cash. What do you do? You sell assets - and the best stuff you hold, will typically fetch the highest price, so that tends to be what gets shifted first.

What we are looking at here - with Global debt running up the way it is - this is way worse and more bubble-crazy than any of the historical bubbles ever were.

See, it is clear as shattered glass that this debt above will never be paid down with real money. Some sort of scheme will be required to bring the Big Global Money System back into balance, we suspect.

John Law's use of "rentes" was interesting. Everyone views his scheme as a great fraud now - but seen thru the eyes of the Government of France, it actually worked out pretty well, and reduced French national debt to a fraction of what it was before he tried to monetize it all.

All these big debt-management schemes require some method by which the debt is made to be "securitized", sold off to wealthy folks, and the the securities discounted in value down to a much smaller number. Some folks will get left holding a very big bag, we suspect.

But if the "Bubbles" in history were not really what they seemed - then what the heck is this? What we may have here, is really: "The Great Bubble" - an actual, real bubble that may provoke the greatest rush for liquidity ever seen in all of human history, when it finally collapses.

What could cause this? Maybe USA simply repudiates all the USA debt the Chinese hold? Or a small nuclear war begins, several cities taken out, and then reparations have to be paid by the loser? Or a virus that kills like the 1918 Spanish Flu did (roughly 1/2 billion would die now). Something will have to break, somewhere, we suspect, if patterns hold. The resulting response then provokes a liquidity crisis ("The Mother of All Liquidity Crisis Events?"), and national currencies are re-priced and re-valued? Floating exchange rates abandoned?

Truly, we know now that really, anything can happen.

"The Great Non-Linearity" - USA Labour Force data shows a perfect example of a data-series engaging a chaotic jump to a new orbital "phase--space". Source: USA BLS (US Bureau of Labor Statistics).

Where are we now? I'll tell you: Roughly 40% - almost half - of Americans are simply not working. If you look at unemployment claims, the discontinuity in the data is even more extreme. No amount of "seasonal adjustment" can hide what has happened. This data goes a long way to explaining the "Age of Rage".

And flat-lined interest rates asymptotic to zero - essentially the rate-of-return on capital - are not likely going to help folks get jobs. Think like a business-man: If right now, capital has no generative value, then the objective is to preserve and cherish and protect it until such time as it can be useful again - not to squander it on wages for entitlement-addicted youngsters who feel they are owed everything gratis. Employees burn wealth before they create it. Sometimes quite a lot of it.

Since capital deployed does not yield anything - unless you are Microsoft or Google or Facebook, and you have a lock on a process whereby you've "cornered a market", and have monopoly-pricing power - your objective is to SAVE and not to SPEND. You wait for the demand-dry-season to end. But to get people HIRED, you need to create an economic environment where SPENDING can yield something positive - instead of what we now see as this forest of red-lights, each flashing a warning of a big NEGATIVE looming ahead.

Asking business agents to hire folks in this kind of economic environment, is like telling moms that their kids should go play in the traffic. Anyone with any sense, sees that the posted prescription implies a high-risk of avoidable self-harm.

But Government agency folks typically have so little understanding of commerical economic reality, and such well-funded-arrogance, that their lack of sense often translates into an astonishing policy-blindness.

"The Great Non-Linearity" - USA Labour Force data shows a perfect example of a data-series engaging a chaotic jump to a new orbital "phase--space". Source: USA BLS (US Bureau of Labor Statistics).

Where are we now? I'll tell you: Roughly 40% - almost half - of Americans are simply not working. If you look at unemployment claims, the discontinuity in the data is even more extreme. No amount of "seasonal adjustment" can hide what has happened. This data goes a long way to explaining the "Age of Rage".

And flat-lined interest rates asymptotic to zero - essentially the rate-of-return on capital - are not likely going to help folks get jobs. Think like a business-man: If right now, capital has no generative value, then the objective is to preserve and cherish and protect it until such time as it can be useful again - not to squander it on wages for entitlement-addicted youngsters who feel they are owed everything gratis. Employees burn wealth before they create it. Sometimes quite a lot of it.

Since capital deployed does not yield anything - unless you are Microsoft or Google or Facebook, and you have a lock on a process whereby you've "cornered a market", and have monopoly-pricing power - your objective is to SAVE and not to SPEND. You wait for the demand-dry-season to end. But to get people HIRED, you need to create an economic environment where SPENDING can yield something positive - instead of what we now see as this forest of red-lights, each flashing a warning of a big NEGATIVE looming ahead.

Asking business agents to hire folks in this kind of economic environment, is like telling moms that their kids should go play in the traffic. Anyone with any sense, sees that the posted prescription implies a high-risk of avoidable self-harm.

But Government agency folks typically have so little understanding of commerical economic reality, and such well-funded-arrogance, that their lack of sense often translates into an astonishing policy-blindness.

USA Fed-Fund Rate - from 1971 to early Feb. 2021. Mr. Powell says rates will have to stay low for a while, to help the US Labour market recover. Really? This will help the labour market? Are you sure?

S&P-500 Price/Earnings ratio - using reported 12-month trailing earnings. This chart is from "macrotrends.net", but has been corrected to actually show the years on the X-axis. It has a log-scale for P/E on the Y-axis, and shows we are in the 38 to 39 times earnings level on the SP-500, which historically (going back to 1928) has typically been associated with an ongoing downturn, which is the case now.

Going forward, everyone expects earnings to improve, but with Biden now talking about internal travel restrictions in the USA itself, to curb Covid-19 infections, we suspect this downturn might only be getting started.

Many stocks are selling at or near record highs, and one way for the P/E ratio to come back to its historical range - somewhere around 20 times - which implies an earnings yield of 5% (just E/P instead of P/E) - would be for the price of stocks to get dialed back to somewhat more reduced levels. And as one can see from the long-wave picture of USA stock prices related to earnings here, this typically happens.

Consider a $120 stock, generating $3.00 per share annually in earnings. 120/3 = 40. This market is pricing stocks like that 3 is going to become a 6, real quick, and we get a P/E back down to 20. But how often do companies double their profits? Not too often, really. A much more likely scenario, is for the current storm to continue, and that $3.00 in earnings stays roughly the same, and the $120 equity value gets re-priced over time, down to $60. And we converge on a 20 times earnings valuation as we revert to historical norms. Maybe we even overshoot a bit, as often happens with markets. That phenomenon seems to occur a lot more often, doesn't it?

Consider: Mr.&Mrs. Investor: => "We bought at $120, and now, the stock is selling at $60! Oh my!" That seems to happen more often than: Company Boss:=> "Ho ho! We doubled our profits! And we will double them again, next year! We are so clever!"

Which scenario is more likely to play out over the next 18 months? See, the data tells us pretty clearly, that one way or the other, stock prices, on average, will get back to between 15 to 20 times earnings.

The website "quandl.com" reports the most recent S&P-500 P/E at 38.42 times for Feb. 1, 2021. Most other estimates (for current, latest, reported 12-months earnings and prices) are in the high 30's also.

Of course, these high stock-price valuations are supported by the very low level of interest rates. But given the substantial price-inflation that is now being seen in energy and food prices (which are not subject to bogus 'hedonic adjustments'), we suspect that the near-zero rates cannot be sustained too much longer either. We all risk a very serious, non-linear instability developing, otherwise.

So beware of falling stocks. Re-pricing is easier than genius-generation - it always is, and always will be. :)

M1 Money-Supply of USA. (from Federal Reserve Bank of St. Louis). Note the acceleration from $4 trillion to almost $7 trillion in the last 13 months. The chart is a perfect (and dangerous) "hockey stick". Game on. We wonder if and when this Game might someday stop.

C_Machine Fcst is positive. This is a cheesy image captured using the cellphone camera, but it gets the point across. This mechanical AI-approach seems to be curiously effective over time. For our experimental testbed equity, we note the high-frequency trend and the longer-term trend are now both positive. FD: [Update: Feb 4, 2021. Full disclosure: Three other models all turned negative, so we closed our position. We are almost entirely in cash.]


This approach seems a bit like the N2 Transverse-Excited Atmospheric (TEA) Laser - mostly it does not work, until you carefully adjust things until you reach a small region where it does work, and you get a bright beam-spot. All other locations (capacitor plate size, dielectric thickness, beam-rail positions, inductor values) do not produce any laser-action at all, and any minor movement of the electric-discharge-rails, extinguishes the laser-action. There is exactly one set of parameters where the N2 population inversion phenomenon will occur and you will get laser action, and no-where else. Any minor change to parameters, and the phenomenon disappears.

This is a *huge* problem in basic science. Often, attempts to replicate an experimental result will be unsuccessful, unless the researchers duplicate *exactly* the methodology and machinery of the original experimenters who discovered the result. And this is sometimes quite difficult to do.

Scientists and other researchers will fail to replicate the results of an initial experiment, and may rush to declare the results invalid. If enough scientists "pile on", then an entire area of research can be politically "poisoned", as happened with the electrolytic experiments called "cold fusion" for example, many years back. Something seemed to be happening - it might not have been fusion, or it might have. We may never know. Artificial intelligence and machine-learning was also initially ridiculed and viewed as "crackpot" science by semi-educated, uncreative researchers. And those skeptics & critics were just wrong.

I still don't know if the technique here is on to something real, or perhaps I am just getting lucky. It is possible to flip a coin and have it come up heads 5 times in a row. The probability of that is 3 and 1/8th times out of 100, or 0.5 to the exponent 5. Luck happens. But if you get 10 heads in a row, you start to wonder about the coin... Or the coin-flipper! Or the data. And here, I just don't have enough data yet... :)

This shows a "Benner-Fibonacci" projection, we did back in 2016, which calls for a "Major Trough" in 2021. I found this inside an old copy of "Elliot Wave Principle", circa 1978, reprinted 1984, which I had on the bookshelf.

This projection was based on the Benner-Fibonacci analysis, contained in Frost and Prechter's "Elliot Wave Principle", and basically, I just took the books chart which covers 1954 to 1987, and projected the cycles forward to 2041. It caught the 2003 trough, but missed the 2009 "Housing/Financial Crisis" trough, and projects 2021 as a major trough - but of course missed the Covid-19 meltdown last year. These sorts of "long-wave" cycle analysis are not to be trusted as viable, rational predictions. But one cannot deny that market and business cycles do exist, and appear to occur regularly throughout market history. Our current period of massive government spending, and central-bank money-creation - yet without serious inflationary pressure being evident (yet), is certainly unusual, and we suspect represents an extreme situation. The recent wild swings in the market price valuations of what are clearly low-value stocks also seems to suggest we are nearing a "top". I know an old investor who has been successful, who remembers the 1960's, and commented that "at the end of a major market cycle, just before a downturn, the junk starts to move." And well, we are certainly seeing this. The "junk" is moving quite well now - and this cannot be denied either.

Our point here is that this is not just "Robinhood" and the "Reddit Rally" at work. This kind of market-action was absolutely evident at the end of the 1920's boom, and also at the end of the 1960's boom. It was also evident in other markets at the end of a speculative run-up - the two famous examples being the John Law "Mississippi Scheme" experiment in France with paper currency, and the "South Seas Bubble" in England, both in the mid 1700's.

We are deeply concerned that everyone is assuming that Covid-19 crisis is essentially behind us now, and that "stimulus cheques" will address the issues facing major Western economies, and re-ignite long-term economic growth. We caution that this outcome just does not seem to be in the data we are looking at. Where we live, a strict lockdown and "State of Emergency" remains in effect. Travel is restricted, many stores are closed, vaccines are unavailable except for politically-connected folks or special-interest groups, and infection and death-rates continue to rise. We know many folks who have cancelled projects which would have required significant expenditure. These projects may never be undertaken, and a "new-normal" of reduced level of economic activity may become evident and last for several years.

I was surprised to find this little "back-of-an-envelope" cycle-projection, calling for a major downturn in 2021. It was done 5 years ago in 2016, and knew nothing about Covid-19. But we wonder if Covid-19 will become the "Big Excuse" for all sorts of economic change. We are already seeing it being used to justify an astonishing level of service-quality reduction in an number of areas. To create a serious market trough, all that has to happen is for the current speculative "bubble" to continue (and then "burst"), and then a majority of people to reduce expenditure, and simply cancel or delay (for years) economic and business plans they had previously in place.

We don't actually need "Covid-19" to trigger a Depression. Just a rise of a couple of points in interest-rates, some tax increases (to fund the massive government expenditures being carried out), and some sort of further economy-wide inducement to avoid spending money or engaging in business activity - and then we have all the conditions needed for a solid, self-re-enforcing downturn to get rolling.

I think the current stock-market price levels are not supported by underlying valuations - at all. Electric vehicles - even a modest sized Tesla SUV - cost over $100,000 in Canada. The conversion of an oil-based economy to one that uses EVs - Electric Vehicles - will be very expensive, and will seriously impoverish those who need to purchase the things.

The current crop of "Green Politicians" are lying to us, when they suggest that a "Carbon Tax" will create economic opportunity. It is just not true. It is just more tax-cost for the average economic agent, who is already under severe stress - both as business person and as a consumer. A few rich Toronto lawyers and high-paid Government workers are doing alright - but even they cannot travel, and so are not spending like they used to .

This is just not an economic environment that motivates a heavy run-up in equity valuations and stock prices.

This just looks like a really serious bubble - and seems to have the characteristics of all bubbles - fueled by massive cash stimulus, borrowed money, and young folks shouting "Hey, man, I want MINE! Let's light this candle! Wheee!"

Predicting the outcome here is not really too difficult, is it?

John Law - Dutch Cartoon from 1730's - Law is being fed gold coins by French Royalty - to be turned into bank-notes crapped out of his backside - and grabbed by those seeking quick profit! Rather like "digital currency" perhaps? The idea was to inflate away the French national debt, and it worked. The scheme was successful - except it bankrupted many who stayed at the party too long. :)