Way back in the last cycle, the DotCom bust combined with 9/11, led to recession. Corporations laid people off en masse. Deflation ensued. The Fed took "extraordinary" measures lowering interest rates to 1% for 1.5 years. That easy money period generated the U.S. housing bubble. The Fed raised interest rates 17 times in a row, which then popped the Housing bubble causing the "Great Financial Crisis". So what did they do? They lowered rates to 0% for eight years, creating a bubble in everything this time. Because everyone knows that the cure for too much debt is to subsidize more debt. Basic economics.
Now, the Fed is raising rates steadily and obliviously similar to last time. The first bubble to pop was Emerging Markets earlier this year. No one seemed to notice. They just moved their money to Go Daddy.
Now, the U.S. housing market is buckling as well. If you look below, you see that in the last cycle, housing cracked early and Emerging Markets cracked late in 2008, around this time of year:
Looking at 2008, the Fed paused cutting interest rates due to a late cycle burst of "inflation". Which turned out to be transitory.
Notice that gasoline futures and interest rates spiked in mid-2008. And there was a spike in June this year as well. Back then this spike caused the Fed to temporarily pause their easing campaign. This year it caused the Fed to accelerate their tightening campaign.
Wall Street already KNOWS the cycle is over. And CEOs have been selling with both hands. So the only people who don't know are the Fed, Trump, and the sheeple at large.
Unfortunately the latter all have too much invested at this point to start believing that the economy is weakening. So they don't. They're boxed in by their own denialistic delusion.
Even the Mad Man gets it:
"From what I've seen so far this earnings season, it might make sense to put next year's three planned rate hikes on hold until we know if the nascent strength is dissipating before our very eyes."
"The Fed seems to want to ignore anything negative"
Regional loan demand is also decelerating, "not a good sign" for an economy that runs on credit"
One by one all of the bubbles have been imploding, but they've been totally ignored: Biotech, FANG stocks, large cap Momentum, FinTech, Social Media, Chinese internet, Semiconductors, Video Games, Cryptos, AI, pot stocks.
In other words, another Wall Street pump and dump has ended.
Because that's all the last ten years was, another big pump and dump:
