When the tide goes out, you find out who is swimming naked

The local market was hit from the start and gave up all the bounce from yesterday and some more. The main bashing was again led by the technology sector, with miners next. 

The telecom sector looks bad, but that’s mainly due to TLS going ex-dividend today. Supermarkets, with WOW and Utilities with APA the only green sectors. 

Meanwhile, the bond market is adamant inflation is coming. And in commodities, the market is adamant that it’s supply-risk-based cost inflation. Equities are in denial and betting on economic recovery and the US Fed to save their bacon. 

The Fed has basically said the economy is weak and will need support for a while, and they're happy to let inflation run hot to achieve that. That basically burns both "get out of jail free" cards for equities. Bond yields have done the V shape recovery like Equity markets but the Economy has not.

Central banks keep saying they are trying to boost the economy, but all they are doing is boosting asset prices. The sad part of the whole mess is that the top end of town has control of the government and central banks.

And they are becoming weapons of mass destruction regarding their own destinies.

Almost 80% of the assets are held by the top 20% and the asset prices are supported by weaker regulations and cheap lending. In the real-world, 80% of the asset bubbles enjoyed by the 20% are paid for by the future earnings and growth of the bottom 80%. 

Central Banks should stop supporting asset bubbles and deliver economic stimulus. Governments should deliver reform and growth plans instead of finding new ways to hand over more of the taxpayers money to the top 20%. 

But we live in the real world, when the self-interest of Central Bankers and Politicians sees them hand over as much as possible to their mates in the top 20%. This largesse is then fed back to them after they leave their post, in the form of highly-paid "zombie jobs". Just follow some of the career paths of the recent decade, and even Stevie Wonder can see the broken system. 

The beauty of the reflation trade is that we finally have one thing they can’t fudge. Costs are going up. Food, train tickets, petrol prices, costs for energy, insurance, education and more. 

Politicians and Central Bankers can lie about the facts, but the public is going to feel it in their pocket. Sooner or later, people will wake up and demand “Socialism for the many and Capitalism for the few”. We are already seeing that in the US, and that matters. 

The US is headed towards stagflation and that will pop all asset bubbles. From growth stocks to property to equities to cryptocurrencies. As I said in the headline: When the tide goes out, you find out who is swimming naked!

The JobSeeker upgrade this week is a classic example of greed biting the hand that feeds it. RBA and the government have stolen decades of super returns from between 15 million and-20 million Australians, to bail out some very bad businesses. We spent hundreds of billions on JobKeeper to bail them out. We learnt that minimum wage and/or unemployment benefits are so bad that most around the world can’t survive. 

The billionaires and millionaires actually need millions of poor people to survive to keep the economy moving or they will lose it all. But we continue to steal from the poor and save the rich purely for self interest. The irony is that US has realized that there is a limit to everything….even GREED. US is raising minimum wage and delivering endless handouts because the top 20% realize that they are feeding from the systematic theft of the bottom 80% and the game is over. Will we learn from that or repeat the mistake?

Comments on US market last close

US market started very negative before recovering on US Fed comments and last hour pump to finish slightly up for DOW and S&P while down for NASDAQ and RUSSELL. US Fed basically said the economic recovery cycle has a lot more to run and they will let inflation run. Bond yields barely moved and USD ticked higher. Despite that commodities keep climbing as inflation trade remains in play. Opening up and reflation are in play while lockdown and growth stocks are under pressure. Bitcoin and SPAC were under pressure like growth stocks. Expect bond yields to keep climbing and USD to keep sliding.

Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy!!!

Full SUNSET STRIP report with end of day market stats are on the attached link/pdf.

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