As FT Alphaville noted yesterday:
In case you were wondering, the Strait of Hormuz is still closed. The US economy is propped up by an AI buzz that is increasingly fuelled by vast off-balance-sheet exposures. The Fed is possibly going to raise interest rates. China's economy is still slowing. Yields everywhere are climbing, and Japan is suffering a bond crisis. Private credit is stressed. Virtually every measure of leverage is engorged. Asian geopolitics is messy and getting messier. Europe is Europe, and the UK is being particularly British.
And as they want to show, US investment funds appear to have record-low cash levels at present, record-high levels of exposure to the US equity markets, and without apparent exception, everyone is betting that the euphoric rise in those markets will continue.
The belief is that this time everything is different.
And as the article points out, that's nuts.
This cannot continue. A system put into this state will break. That is not speculation. It is a statement of fact. That only question is when. And as even FT Alphaville thinks, soon has to be the answer to that.
My sense that we are living through the equivalent of the summer of 1939 at this moment, waiting for the storm to break, grows by the day.
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And when the storm does break, we all have to be ready with our arguments for what the recovery looks like, as you are.
Here’s my modest contribution: other people’s ideas which I’ve drawn together.
https://criticaltakes.org/the-corporation/ten-proposals-for-curbing-corporate-power/
I’d be interested to know what you think of it, Richard.
My question would be, how? You do not say.
You’re right, it’s not a plan of action. That’s by design: I think the plan of action has to come out of discussion and consensus-building among many different people and organisations and as an individual I don’t have the means to make that happen. But it’s useful to have a core of general ideas, as a basis for consensus and ultimately for action, and I do have the means to do that.
Given the state of the markets, I no longer believe in the law of gravity.
“everyone is betting that the euphoric rise in those markets will continue” -)-)-)
Who are these people betting against I wonder.
Michael Burry of ‘The Big Short’ fame for one
FT Alphaville is the best financial journalism out there, at present. I think Stein and Keynes have said it all….
If something cannot go on forever, it will stop.
Markets can remain irrational longer than you can remain solvent.
Sun Tzu wrote “Speak quietly whilst wielding a big stick”. The problem in 1939 was that Neville Chamberlain spoke quietly whilst wielding an umbrella.
The kind of big stick that would have been effective in deterring Hitler isn’t appropriate in this theatre and I have no idea what could be effective as a substitute. Richard, the other bloggers and YouTubers who espouse similar thinking and those of us who follow them and agree with their principles have no real, effective power to wield in the short term. That isn’t an insult to anybody, it’s a regrettable statement of fact.
So, as in 1939, the coming disaster cannot be averted. We must each examine how seriously we are exposed to it’s likely consequences and what, if anything, we can do to minimise the impact. I have no control over where my pension fund is invested but will be planting potatoes when it stops raining in my corner of Tasmania and possibly increasing the number of chickens we keep.
As if on cue, I just read this. Directly comparing the situation with 2008, and highlighting “Sooner or later the party will finish”
https://splash247.com/global-ship-orderbook-growth-hits-fastest-pace-since-pre-lehman-boom/
It will…..