Can You Time Peak Crazy?

You don’t need me to tell you how completely crazy and distorted the financial markets have become over the last decade. Anyone reading this already knows that, which is partly why I stopped writing on the topic several years ago. I came to the conclusion there was no point in constantly screaming at the top of my lungs about what a farce the global financial system was. Instead, I decided to step back, let things play out to their predictably tragic end, and then play closer attention as the curtains started to come down. As has been made clear in my recent commentary, I think we’re now reaching that point.

I’ve begun reflecting a little more about the lessons I’ve learned over the past several years of status quo stupidity, and one particular conversation I had a while ago with a friend who was a portfolio manager at a major hedge fund came to mind. I searched my old emails to find exactly what I had written, and the response became the inspiration for the title of today’s post.

The correspondence occurred nearly four years ago, in February 2015. His initial message highlighted a FT article about the fact that Nestlé bond yields had turned negative. This was my response to his email:

Once you enter certifiably “crazy” territory it becomes almost impossible to bet against crazy until it is obvious it is all unraveling. Once in crazy territory it can easily get more crazy since crazy has already been established. 

The above is why you should never bet money against crazy simply because it’s crazy. Crazy can go on for a long time, especially when the people in charge see themselves as gods sent from the heavens to deliver the planet from the horrors of declining asset prices and lower financial industry bonuses.

But crazy always ends at some point, and the crazier the period preceding the reckoning, the more intense and disruptive the subsequent period will be.

I tend to think yes when thinking about the above, and if that’s right, then the consequences of the largest asset bubble in history would likewise be historic. At the least we’re going to have a total change to the global financial system, the sort of thing that typically happens only once a lifetime. That’s the conservative take.

The more radical assessment would be that the largest asset bubble in world history will be followed by a level of disruption and change that only happens every few hundred years. The period of time that seems most similar to this one in (sorta) recent history would be the late 18th century, when we witnessed revolutions in the 13 American colonies and in France that changed the world dramatically for centuries to come. That’s the level of change I suspect we’ll see, and even that could be conservative given the pace of technological change we’re living through.

We’ve already seen the warning shots, as the social and political structures of many countries are already pretty far along the path of major transformation. Trump’s election, Brexit, the Yellow Vest and the Italy’s elections, just to name a few. Significantly, many of these things went down while the financial market bubble was still propped up and inflating. What will happen on the social and political level when the market cycle really turns is anybody’s guess, but you can be assured it won’t be business as usual.

So what should you do? I think the worst thing you can do is look at the current world and try to do all the things conventional wisdom tells you to do. Rather, look around, think about what’s terminally broken around you and think about how things could be different in the future. If you’re particularly motivated and talented, don’t just think about these problems, try to come up with the most conscious, beneficial and revolutionary solutions you can and then give it a shot.

Not everyone can be Satoshi Nakamoto, but you get the point.

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13 thoughts on “Can You Time Peak Crazy?”

  1. Yes, I suspect that things are going to be truly savage. At my age and in poor health, I do not expect to survive. When I lose my financial lifeline, I’ll just sit and starve, resigned to what is to come.

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  2. I haven’t been this hopeful since the Occupy Movement burst onto the scene. Back then, the establishment didn’t know what to make of it and naively thought that Zuccotti Park was a one-off event; but their message resonated with the public and soon encampments were springing up like dandelions in most major cities and towns.

    The movement was soon crushed, but not before its ideas were planted into the public consciousness, where they have quickly taken root in the intervening years. Now it is common to hear about the wealth inequality problem (the 1% vs the 99%), banksterism, globalism, bailouts, socialism for the rich, etc., subjects which were once carefully avoided by the corporate media.

    Today it is the Yellow Vests’ turn. The problems have only grown worse since Zuccotti Park, nothing has been solved. This time, however, the revolutionary ideas are more broadly established and better understood; and for their part, the status quo has done nothing since then but further damage the social contract by displaying their greedy and corrupt ineptitude.

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  3. My bet is on a return to family values and local community efforts as the shield against the breaking machine. If govts were smart they would also think about a very speedy introduction of the minimum income idea. This would even out the inequality to a degree, but more importantly, it would take the steam out of so much angst fueled by the stress of not being able, or thinking you won’t be able, to meet basic needs through no fault of your own.

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  4. Michael, as you and I have discussed at length, if you are trying to time “Peak Crazy”, astrologically it will be March 2019 into 2020, when Uranus re-enters Taurus for an 8 year stay.

    But you also have to factor in what the real powers that be (“the rulers of the darkness of this world”) will do, and when they will choose to take certain actions.

    What will those actions be? War? Another purposefully engineered “financial crisis”, or both?

    One has to assume that that will depend on how much total control they can gain over Trump in the next 6 months. While keeping in mind that it’s all really just Kabuki theater on the surface.

    With that being said, it looks like the Yellow Vests in Europe came out of left field, and was not anticipated. Macron is just a boot licking lackey for the Rothschild’s. So he’s very expendable as far as that lovely family is concerned.

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  5. Right on point …once again . Not sure how many people, know what’s coming down the pike . Suspicion tells me none at all , ( hardly any) which is exactly how the “people in the know ” would like it play out , as they keep the focus on the phoney ” global warming ” story ( tax grab ) .
    The markets are wonderful machines at trapping the masses in order to move the other way , and we are in for a move like never seen before in the history of the world .
    im still trying to figure out , will money still have worth ? Gold ? Or will it be commodities like salt sugar , spice.? That’s the sort of turn comming , and we are months away from the EVENT HORIZON!! Not years , as you know .

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  6. Your “crazy” theorem closely parallels one already established: That markets can stay irrational longer than you can stay solvent (betting against them).

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  7. It’s extremely difficult to time peak crazy, as the crash showed a decade ago. I remember reading Peter Schiff’s “Crash Proof” when it came out in 2007, thinking a serious downturn was imminent. Then came the housing crunch and bank failures and it all seemed to be on pace for the big system reset we needed. When the Fed stepped in with TARP, I didn’t think they’d be able to paper this ponzi over for more than a decade, but they have.

    Still, it’s important to remember that nothing was fixed, just propped up with more debt and central bank intervention. Additionally, we now have far more social problems than we had in the 2008 crash and there is more global instability. We have an angrier society where people despise each other over every dividing characteristic imaginable. We’ve also stopped trusting each other, the banks, the military, the media, and the political system. Nearly everyone is a “conspiracy theorist” to some extent (myself included) with the most extreme version being Flat Earthers. When we’ve devolved to the point that we think a spherical Earth and gravity are conspiracies, we live in interesting times.

    All any of us can do is live the best life we can with whatever time we have. Media propaganda and troll farms don’t bother me anymore since only a dwindling number of people still believe them. The problem is the undercurrent of anger around the globe, which is bound to find a violent outlet eventually. So be nice to people (lest they snap!) and find enjoyable company, people who like the simple things in life and won’t totally freak out if their investments tank.

    We may not be able to time crises, but we can get ahead of the curve and mentally prepare. There will be plenty of people without cool heads, so having one yourself could be very valuable.

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    • I’m hopeful that a lot of that animosity will wane once we have to deal with our neighbors locally face-to-face as real people. So much of this animosity is ratcheted up by the likes of Fox News and MSNBC.

      My father told me yesterday that all the Democrats are socialists now (Ha! I wish). But he was completely serious.

      But if things fall apart and we all have to work together in our local areas, I’m hopeful it will no longer matter which of the two available parties one belonged to (or didn’t for those of us smart or stubborn enough to abstain from membership).

      The less hopeful part of me figures the people with the guns will just wipe out the ones without them. But I’d rather die via gunfire than starvation anyway.

      And on that pessimistic note… I’ll end this comment.

  8. I can see from the comment about governments instituting a minimum income giveaway program that we are still approaching peak crazy. Also, more proof this week with Cali and NY announcing free healthcare for all. We are STILL CLIMBING !

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  9. Interesting thing about PREDICTIONS ! Most people claim that they don’t make any, but that just means that they intend to respond (predictably) to whatever happens.
    The simple fact is that no action of any kind is possible without some prediction of the future, so it is worthwhile at least TRYING to get it right.
    Unfortunately, all predictions are based on some perception of the past, and it’s hard to find two people who even agree about what happened, let alone what will happen as a consequence.

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  10. Debts no longer matter. Policy and resources matter. Are policies fair; can they keep oil, water and other resources on line. My prediction; oil shortages by about 2022; the powers that be don’t have an answer for that one.

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  11. I always consider that the National Guard is not shooting college kids right now before concluding that it’s never been this crazy before.

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