Q: What is worse than the Fed raising rates? A: the Fed loosing control of rates. Financial Depression looms and the Government cannot prevent disaster. Furthermore, financial pain will fuel public anger in unpredictable and dangerous ways
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| Social unrest will increase |
November 2022 performance
All assets (except crypto) soared in November 2022. The Dow had its best 2-month period since the Great Depression. A rise of 5.84% for the Dow has almost erased all loses for the year. Chicken Little gained just under a percent in November as falling interest rates helped the portfolio.
Between October 13th and December 1, the Dow rose 6,000 points; more than 20%, and more than twice the average yearly gain over the last century. If you are bearish and bloodied, join the crowd.
However, year to date, losses continue across all major asset classes with bonds having an historically, catastrophic year, and crypto devastated. The Dow is the relative winner among stock market indices and gold has lost only 3% this year.
Chicken Little remains 100% bearish
We are in the early stages of a debt crisis. Therefore, I remain firmly negative on asset markets. By overspending and printing money, the US Government created a bubble of historic proportions. The declines we have see so far are modest compared to what will happen.
US debt/GDP is higher and set to move higher faster:
We are at record debt levels with much more looming. The estimates of future deficits are very optimistic, therefore reality is likely to be worse.
What will happen as debt levels continue to rise? The most probable outcome is a continued rise in real interest rates. The Fed will be powerless to reduce the real interest rate. The tightening of financial conditions will cause many of the most important financial parameters will reverse.
December 2022 portfolio position
The Chicken Little Portfolio remains prepared for financial disaster. During November, I cut the short stock position in half as the rally exploded higher. If the market falls, I will increase the size of the short position.
December 5, 2022, Dow: 34,000
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