Nice summary of the pitfalls and warnings from the Economist:
Summary of the 7 deadly sins of our current economic era:
Lust for Crypto
Retail Envy
Lazy circularity
Furious dealmaking
Debt gluttony
Patriotic pride
Avaricious fraud
And what's coming:
Judgment day
For now, Wall Street expects the good times to continue. Credit spreads remain tight. Equity-market volatility is low. Retail investors show no signs of flagging. Last week Robinhood, an online broker, said that its clients’ borrowing had risen by 153% this year. The makings of a bubble often become clear well before it pops. Alan Greenspan warned of “irrational exuberance” in 1996, some four years before the next crash came.
Yet in some corners the mood is beginning to sour. Take crypto. Earlier this year Strategy traded at more than double the value of its bitcoin holdings. As the price of bitcoin has fallen, the company’s shares have fallen even further. Its premium has eroded to around 20%. If it is unable to sell more shares, it may need to liquidate its bitcoin holdings to pay steep interest costs. As a large owner, and ever larger champion, of bitcoin, it risks ending up in a downward spiral.
Worries about credit markets have grown, too. First Brands, a provincial manufacturer of spark plugs, borrowed more than $10bn before collapsing into bankruptcy. Its lenders now accuse it of fraud. Jamie Dimon, the boss of JPMorgan Chase, warned that more “cockroaches” would emerge. Since then a few have scuttled out from under lenders’ loan books. Some business-development companies, a type of private-credit fund, are trading well below the value of their assets. Shares in Blue Owl, a private-credit firm, have fallen by more than 40% from their peak at the start of the year. Markets and regulators have turned on Egan-Jones, one of private credit’s favourite rating agencies. The industry’s use of life-insurance policies to fund investments is also being scrutinised.
Then there is the question of whether Silicon Valley’s colossal spending on AI will pay off before investors lose patience. If it does not, the punishment may be harshest for companies that have succumbed to the seven sins. The consequences, though, would ripple far beyond them. Losses for investors would spill over into consumer spending. Credit markets—and possibly the government—would also bear losses. Parts of the financial system that have hitherto been untested would come under strain. Engineers would be put out of work. But the financial engineers would be to blame. ■
One thing it left out was the transformation of the American economy, in large part, to a fasicst loyalist economy. Want to get your merger approved? Pay the vig to the regime. Want to get regulatory approval for a permit, license, etc.? Pay the vig to the regime. Want to keep the DOJ out of your obviously shady business? Vig. Etc. etc. etc. Large enterprises have to pay the vig both to obtain favorable treatment, AND to avoid punishing treatment. They must pay both protection money AND bribes, with the same dollars.
That phenomenon skews the fuck out of the market.
The correction crash here is going to be insanely chaotic and wide-reaching, and here's the cherry on top: when it happens, we have literally the least competent, least qualified regime and operators within it in our nation's history. Our plane is going to hit a flock of geese and flame out all engines, and instead of having Sully on the stick, we have a team of deranged monkeys in ill-fitting pilot suits in the cockpit.