- Hole in the space-time continuum: Roubini and Rickards
- Charting the Panic of 2008 (You are here)
- Another spin on Twitter privacy
- Big 5 stocks suffer “fading dominance”
- Countdown to an “untested” price cap
- “A right-wing arm of the Republican Party”?
Something ripped a hole in the space-time continuum: Playboy economist Nouriel Roubini is on the same page with Paradigm Press macro authority Jim Rickards.
Roubini, if the name doesn’t ring a bell, taught economics at New York University for a quarter century and runs his own consulting firm.
In some respects, the two are quite similar. Even though they both anticipated the onset of the 2007–09 global financial crisis, they’re both frequently dismissed by the mainstream as “permabears.” Roubini is out with a book this month; Jim will be out with his next month.
But by and large, the similarities end there. For one thing, Jim’s been married to one woman for more than 40 years. Roubini is frequently seen amidst a multitude of young models…
“They love my beautiful mind,” Roubini told New York magazine years ago.
They also differ politically: Roubini did a stint on President Clinton’s Council of Economic Advisers. Jim recently described himself as “ultra-MAGA” — although we suspect he was trying to get a rise out of his ideological adversaries.
And the two have tangled over the years. In 2011, Roubini and Rickards got into an epic 16-hour flame war on Twitter — going mano-a-mano about the gold standard.
But in the present moment, the two are echoing some of each other’s dire warnings.
Roubini did an interview this week with the Bloomberg Surveillance TV show. “Right now,” he said, “all central banks are playing tough, and talking tough and acting tough — hawkish — because they have a problem of credibility.
“But in my view, there are two problems. One problem is if they try to get to 2% inflation, they cause a recession. And this recession is not going to be short and shallow. It is not going to be garden variety. It’s not going to be plain vanilla.
“It’s not going to be two quarters of negative growth and then inflation collapses and they can ease again… It’s going to be a severe recession because of the debt ratio — because we’re going into fiscal and monetary tightening. And at the same time, not only do we have an economic crash, you’re going to have also a fiscal crash.”
Note that Roubini said “all central banks.” It’s not just a U.S. thing. And they’re doing it at the worst time — when the world is choking on debt. The global debt-to-GDP ratio has soared to an unsustainable 350%.
“The world is close to a global recession, something that rarely happens, “Jim Rickards affirms.
“Even when some economies enter recession, other major economies may be performing better and are able to help pull the slowing economies out of their rut. In a global recession, there is no economy or economic group that can perform this locomotive role for the rest of the world.”
Reminder: It was debt that ultimately set off the 2007–09 financial crisis and the Panic of 2008.
Which brings us to this eerie chart Jim shared in a special email this week. If you missed it, it’s really worth a look. It’s the stock market decline so far this year (the blue line), overlaid on a chart of the 2008 drop (the red line).
“According to my research,” said Jim, “on Wednesday Nov. 2 at exactly 2 p.m. we could get hit with another ‘Lehman-sized’ event — one that will send markets plummeting virtually overnight.”
To help you get ready, Jim is convening an emergency briefing this Sunday night at 7:00 p.m. EDT.
At that time, Jim will lay out a crash-protection strategy he’s used to show readers like you how to bag gains of 740%… 832%… 900%… even 1,000%… just since last March.
You’ll even get a free trade recommendation that could potentially 10X or more in just weeks or months during a crash. Just click this link and you’re automatically registered; we’ll send you an email link to the event as we get closer to Sunday night.
One more thing, and this is crazy: Roubini is now keen on gold in your portfolio.
Deep in The 5’s voluminous archives is a Roubini pronouncement to The Guardian in mid-2013 that “the gold bubble is deflating.”
Jim Rickards was asked for comment during an interview with Kitco News: “Roubini said it was a bubble at $1,000,” he replied, “it was a bubble at $1,200, a bubble at $1,500… He was consistently wrong. So I didn’t read or hear about his latest prognostication, but I [see] no more reason to give it any credence than all his prior comments.” Burn.
But here’s Roubini this week, anticipating the Fed will have to “pivot” away from tightening eventually — just not as soon as conventional wisdom says. “Gold has not done very well because you have tight monetary policy and a strong dollar. But if central banks are going to blink and wimp out, gold is going to rise in value.”
Jim agrees: “It’s axiomatic that the dollar will be trashed to pull the U.S. out of a recession (a cheap dollar imports inflation). It’s back to the currency wars! And a weaker dollar means a higher dollar price for gold.”
To the markets today — where Twitter is no longer a publicly traded company.
At this point, we don’t have anything to say about Elon Musk’s takeover of Twitter that we haven’t already — for instance, here.
➢ OK, one thing: We find it, well, interesting that on the same day Musk closed the deal, someone leaked to The Wall Street Journal that the Justice Department and the SEC have opened an investigation into whether Tesla misled consumers and investors about its driverless-car technology.
As for the major averages, everything is solidly in the green — up at least 1.5%. The Dow has soared over 32,600… the S&P 500 is at 3,868… and the Nasdaq is nine points away from cracking the 11,000 level again.
That’s despite Amazon dropping more than 9% after forecasting that holiday sales will be a dud — at least 5% less than the “expert consensus” of Wall Street analysts was expecting.
Apple, on the other hand, is up 7.6% after logging record quarterly revenue. That’s despite what it describes as “significant” headwinds from a strong U.S. dollar — which makes Apple’s wares more costly for foreign customers.
On the whole, however, it’s been a miserable week of earnings announcements for what were the “Big 5” stocks in the S&P 500 during the last decade — Apple, Microsoft, Amazon, Google and Facebook.
Only last year, those five companies made up over 22% of the index. Today? Barely 16%…
More than five years ago we observed how those five companies were vastly outperforming the rest of the S&P 500. We also cited one Owen Williams from the firm Williams Market Analytics: “This market has become a one-trick pony. It has sure been a good trick… as long as it lasts.”
It lasted longer than it had any right to… but now it’s over.
The big economic number of the day will do nothing to dissuade the Federal Reserve from its current “tightening” path.
The Commerce Department is out this morning with the Fed’s favorite measure of inflation — “core PCE,” it’s called. The September figure is up 5.1% year-over-year — rising for two straight months and back to last April’s levels.
As for other asset classes today… bonds are selling off, pushing yields higher. The yield on a 10-year Treasury note is back above 4%. Precious metals are getting clobbered, gold below $1,640 and silver only pennies away from $19.
Crude is off 2% to $87.34. Speaking of which…
It’s time to start a countdown clock on the preposterous “price cap” scheme the United States hopes to impose on Russian oil — yet another weapon of economic warfare certain to fail or backfire.
It’s 39 days before Washington and its Western allies are set to impose the cap on Dec. 5 — on the theory it will limit the revenue Moscow can rake in for oil sales. “Officials said no price range has been decided yet,” according to Reuters, “however one person familiar with the process said the cap will be determined in line with the historical average of $63–64 a barrel — a level that could form a natural upper limit.”
As we’ve noted before, the success of such a scheme requires the cooperation of many parties who have no incentive to cooperate — starting with Russia and its willing oil customers like India and China.
Even Western-dominated institutions are voicing skepticism now: The World Bank says the scheme is an “untested mechanism” that could reduce the flow of oil from Russia. Fatih Birol, chief of the International Energy Agency, says the world still needs Russian oil to function smoothly.
Worst-case scenario: Russia retaliates by cutting production. Mainstream analysts from the likes of JPMorgan Chase have said that step could drive up oil prices from their current sub-$90 levels to as much as $190 — or in an extreme situation, a “stratospheric” $380.
“It is of course no secret by the articles you print, that you are a right-wing arm of the Republican Party in hiding,” writes a semiregular correspondent. “Knowing that, I still enjoy reading your tropes as I also listen to Fox News to see and hear all sides of issues.
“However, putting into print an obvious conspiracy theory at the 4:35 mark Wednesday that the world’s elites are trying to reduce the world population and Biden is their Satan was over the top. It only provides cover for those individuals who would normally lay low in the shadows, without recruiting other like-minded malcontents.
“I was proud of you though for printing that the Holocaust was a real event in the atrocious history of our civilized world. There’s a little good in everyone.”
The 5: You did notice it was a reader saying that, not us — and that we replied by saying all else being equal we’re inclined to attribute reckless policies to stupidity and not evil, right?
Or are you of the more censorious mindset that would rather we not air such an opinion in the first place? Sorry, but we’re fuddy-duddies around here who continue to believe genuine “misinformation” withers in the sunshine.
The following meme is a much better representation of where your editor stands on the political spectrum — that is, nowhere.
Not exactly a Republican sentiment — of either the MAGA or the Never Trump variety. And something to think about — hard — over the next 10 days…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Crunch time: Next week, says Jim Rickards, “could spell disaster for America and the markets, we could see the Dow plunge by 80% or more and thousands of companies could spiral into bankruptcy… This is the biggest story no one is telling, it’s bigger than China, bigger than inflation, bigger even than Ukraine… and it’s set to take place just days from now.”
There’s no time to waste: In homage to the title of his 2016 book The Road to Ruin, Jim is convening an emergency online briefing called The Road to Ruin — The Final Chapter.
It’s set for this Sunday at 7:00 p.m. EDT. And registration is as simple as following this link: Click, and you’re in.
