Two Cautionary Tales Rolled Into One


“If there is anything unique about the human animal, it is that it has the ability to grow knowledge at an accelerating rate while being chronically incapable of learning from experience.”

― John Gray

Addison WigginDear Reader,

You may be aware, we try to work Merriam Webster’s “Word of The Day” (WOD) into each of our missives. Today’s WOD was nearly prophetic.

It’s true. We’ve taken on a couple of mettlesome topics this week. The dry powder-keg at the Federal Reserve. Along with Chrisopher Leonard, we observed the Fed can’t “normalize” rates because it will “nuke the economy”.

We also observed, with Scott Horton, that just because we understand Vladimir Putin’s motives for invading doesn’t mean we agree with them or think he and his cronies are right.

During our discussion, Scott quotes a comedian to make the point we all know is true on some level.

Mr. Horton:

The great comic, Dave Smith, my good friend, has this bit where he talked about the origins of September 11th. He goes, “And then people would say, ‘Come on, man, we’ve been bombing them for 10 years before September 11.’ And then people say, ‘What? Well, that doesn’t sound like us.'” And then he goes, “Yeah, well, but think hard about it. Bill Clinton was bombing Iraq from bases in Saudi from 10 years, wasn’t he?” And people go, “Oh yeah, I guess actually that does kind of ring a bell, you know? Yeah. Maybe I wasn’t putting it at the height of importance in my life, but it could have been important to somebody. I guess I could concede that, right?”

Mr. Horton proceeds to outline a litany of reasons the imperially ambitious Putin would want to counter Western aggression in a historical context, right here. That’s our first cautionary tale: be careful what you say if your curiosity runs counter to the woke mob.

To allay their concerns, we’ll discuss a more precise economic reason for the Russian invasion with commodities sage James West on Monday. It involves both the Russian “pullback” to the Donbas region and an estimated trillion+ cubic feet of natural gas somewhere underneath the Black Sea. Stay tuned.

Today, however, we’re going to leave you with a cautionary tail from the Bank of Japan. Since we began the week trying to understand the inner workings of the Powell Fed, we have been summarily stocking financial journalists from Bloomberg and the Wall Street Journal.

This morning we found this headline: A $430 Billion Cautionary Tale Inside Japan’s Central Bank . It’s worth a read because it foreshadows the nightmare situation the Fed is barreling headlong toward. “The world’s boldest monetary policy experiment,” reads the suhead, “landed the Bank of Japan with a vast portfolio it just can’t quit.”

You may recall we wrote a chapter on “turning Japanese” back in the early days. If not, you can find it in Financial Reckoning Day Fallout, here.

For me, the money quote in the lead of this Bloomberg piece is:

In most of the world, exchange-traded funds are simply tools that allow investors to track a certain set of stocks. In Japan, they’ve been saddled with everything from propping up the market and boosting inflation, to accelerating economic growth, improving corporate governance and even encouraging gender equality.

Following this multifaceted policy, very similar to the one Christopher Leonard laments with today’s Fed, the Bank of Japan have collected 80% of the country’s ETFs.”That’s far further than any other central bank in the world has gone in trying to prime its economy via equities purchases,” Bloomberg gasps, “The Bank of Japan has also outpaced peers with its $3.7 trillion in net bond purchases.”

And yet, one wonders, when they need to unload all those direct purchases, who will be the greater fool to buy them?

Follow your bliss,

Addison Wiggin

Addison Wiggin
Founder, The Wiggin Sessions

P.S. “The moguls are fighting again,” the Morning Brew wrote this morning, “Peter Thiel chided Warren Buffett, Jamie Dimon, and Larry Fink (BlackRock CEO) in a speech at the Bitcoin 2022 conference yesterday, calling the trio the “finance gerontocracy” and dubbing Buffett specifically a “sociopathic grandpa from Omaha. But Buffett isn’t deviating from his strategy. On Wednesday he took a $4.2 billion stake in HP, a company that makes printers, PCs, and other tech hardware. Its stock soared 15% to a record high.”

Our own Doug Hill, who was at the conference, wrote back: “Kevin O’Leary spoke Wednesday on regulation being a huge boom for the industry. His point was once it’s regulated then trillions of dollars will rush in from private offices and public funds.

“I didn’t see Thiel but heard he killed it. Zero Hedge covered his speech and it’s on YouTube. The investing opportunities are only growing in this space. We are in the age of accumulation. Shifting from traditional finance to digital.”

More on crypto next week, too. Doug’s on the trail of a very interesting Bitcoin miner in Louisiana.

Addison Wiggin

Addison Wiggin

Addison Wiggin is founder and executive publisher of Agora Financial LLC, an independent economic forecasting and financial research firm. He and Bill Bonner began writing the firm’s flagship Daily Reckoning in the midst of the tech boom and bust. It was one of the first widely distributed email newsletters on the Internet. The publication’s critical eye on finance and economics continues today. He’s also creator and editorial director of Agora Financial’s daily missive The 5 Min. Forecast.

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