Last Call for the Melt-Up Express

self tapping screw

The economy is a self tightening screw. The Fed doesn’t need to do much work here, Pt 1) and David Hunter who is pushing his melt-up scenario, is continuing to press on, with some pretty good logic anyway. The economy is slowing and the Fed will not follow through on the dreaded rate hike plan while growth slows down, and Pt 2) how in the world did a forty year bull market get to such bearish extremes in such a short time [with an absence of selling volume]. My point.

Economic growth was repressed during the post GFC, decade of monetary stimulus. Now the political obstacles to spending are like a dam about to burst, after no infrastructure bill in the previous administration government spending is lagging growth. Then there is WOAR!

Ukraine’s spy chief claims a coup to overthrow Putin is underway

The collapse of Russia will be far worse for the global economy, than a peaceful resolution, or some other outcome, to the Ukraine war. There are two likely outcomes, both involve chaos. The last time the Soviet Union collapsed the Clinton administration was in Eastern Europe buying black market nuclear weapons material. Outcome one, the Russians sell everything that isn’t nailed down. Outcome two, they shutdown the country, and have their own private revolution. I tend to lean on two, only because the Russian energy industry has been failing under the Putin/Oligarchy leadership. They started the Ukraine war when Putin looked at the books and said, hell, if we sell our gas to Europe our people will freeze to death. Let’s take what’s left and buy some prime Ukrainian Real Estate….

The U.S. is spending a bundle on this war, and it’s NATO allies (a new baby on the way!) That costs money and fortunately one thing Republicans like to spend money on, is defense… Even while they sort of like Putin because he resembles someone they used to know???

Goldman Sachs in a report last month estimated S&P 500 companies in 2022 will spend $1 trillion buying up their own shares. EPFR, Informa Financial Intelligence analyst Winston Chua, who tracks new buyback announcements, said that – at least for now – companies appear to be aggressively repurchasing their shares.Apr 6, 2022

Point three] in the Hunter Chronicles, Supply and Demand. Fewer shares and more money chasing the available supply. Would a 6000 Melt-Up really be that big a deal? Here’s a chart of the stock market in the 1987 time frame. Few things of interest, the stock market for the year, 1987 was pretty much flat after being up 44%. Oh My, the great crash that wasn’t?? And there was apparently a lot more VOLATILITY then than now, because the stock market here is less than 20% peak to trough, and zero sum for the last year.

Going out on a limb the collapse of Russia would be difficult, especially if the globe loses all the oil they provide and which is currently being locked down because of sanctions?? And China climbs into their Neo-Maoist hole… However if you’re really paying attention you will notice that the rolling top in 87′ looks a good deal like what the current stock market is going through. What you are not seeing on those charts is the 1988 recovery.

In two years we had it all back! Thanks TMF. Another point for Mr Hunter, all really great rallies begin with a plunge. Is the plumbers work nearly over, was this trip to 4000 really necessary? When do we turn on the (liquidity) water?? The variables are all aligned, government spending, expansion of the monetary base, shrinking supply of stocks, collapse of the biggest existential threat to global security, and a softening of the hardliners (on both sides of the pond). This is a simple diagram and the outcome is anything but simple. And remember if the 1987 chart is inverted so is that one…. What comes after S&P 6000?

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