Sugar Rush - Why The Economy Will Run Hot, Then Crash

Mar. 01, 2021 10:57 AM ETDDM, DIA, DOG...141 Comments61 Likes

Lance Roberts

Marketplace Leader

Summary

• The expected "sugar rush" from more stimulus is why the economy will "run hot" then crash.
• The vast majority of the growth in the U.S. over the last decade was due to a variety of artificial inputs which are not indefinitely sustainable.
• There is a massive disconnect between the "stock market" and the "real economy."

The expected "sugar rush" from more stimulus is why the economy will "run hot" then crash. As every parent knows, giving a child too much "sugar" leads to a "rush" of energy. Then comes the crash, where you find them in some odd place taking a nap.

The Coming Economic "Rush"

Recently, JPMorgan joined the rest of the Wall Street banks in predicting a surge in economic activity for 2021 of 6.4%. Of course, the entire reasoning behind the rise in activity was due to "stimulus."

"In a note to clients, JPM's chief economist Michael Feroli made the following forecast revisions:

• We now look for a $1.7 trillion fiscal stimulus package (up from $900 billion) to be passed in March

• Even before that kicks in, growth appears to be on firmer footing at the start of the year

• All told we now expect 6.4% (4Q/4Q) GDP growth this year and 2.8% next year

• We see the labor market getting back to full employment, or around 4% unemployment, by 2Q22 and expect core PCE inflation to reach 2.0% by 4Q22, with balanced risks around the outlook.

• While the outlooks for growth and inflation are moving up, Fed rhetoric appears to be getting more dovish" - Zerohedge

Full article at: Sugar Rush - Why The Economy Will Run Hot, Then Crash | Seeking Alpha

Sugar Rush - Why The Economy Will Run Hot, Then Crash | Seeking Alpha The expected "sugar rush" from more stimulus is why the economy will "run hot" then crash. seekingalpha.com

 

The stock market is signaling a ‘severe’ drop is imminent, says contrarian strategist

https://www.marketwatch.com/story/a-severe-drop-is-imminent-this-3-musketeers-stock-market-is-signaling-says-contrarian-strategist-11606824335?siteid=yhoof2

This year’s recovery for equity markets in the face of a deadly pandemic has been remarkable, so a strong December would seem to follow.

But a “pretty severe” stock drop may have already started, if not a week or so away, warns our call of the day, from the True Contrarian blog and newsletter’s chief executive officer, Steven Jon Kaplan. He says there are plenty of signals flagging this if investors know where to look.

“What I notice the most is investors crowding into the stock market and making record inflows, while insiders have never been selling more heavily than they have done in November 2020,” Kaplan told MarketWatch in an interview and emails.

He notes “intense selling” across the board via J3 Information Services Group, a website that tracks company director buying and selling, known as insiders. That means “most knowledgeable investors realize that some big drop is coming…and they’re preparing for it by reducing risk,” he says.

Kaplan says “a lot of things are going to be dropping by 30% or 40%,” and believes we are in a bear market, so suggests looking at pullbacks between 2000 and 2003 for an idea of what’s ahead.

The COVID-19 lockdown is squeezing real estate from all sides and threatens to burst the housing and mortgage bubble

 Recently the Federal Housing Finance Administration (FHFA) — conservator of Fannie Mae and Freddie Mac — extended the moratorium for both evictions and foreclosures until the end of the year. Many homeowners breathed a sigh of relief.

Indeed, over the past few months the number of borrowers with active forbearances has declined. But that’s no reason for optimism. The more serious matter is how many homeowners are now delinquent. By the end of 2020, several million borrowers who have received mortgage forbearance will have gone nine months without making a mortgage payment.

What impact will this have on U.S. housing and mortgage markets? Let’s start with FHA-insured loans. According to HUD’s July 2020 “Neighborhood Watch” report, 17% of 8 million insured mortgages are now delinquent. This percentage includes mortgages in forbearance as well as those not in forbearance. Hard-hit metropolitan areas include New York City with 27.2%, Miami with 24.4% and Atlanta with 21%.

Full article at:

https://www.marketwatch.com/story/the-covid-19-lockdown-is-squeezing-real-estate-from-all-sides-and-threatens-to-burst-the-housing-and-mortgage-bubble-2020-09-21?siteid=yhoof2&yptr=yahoo

Second, small landlords have been devastated by the lockdowns. The results of the latest survey published by the National Association of Independent Landlords (NAIL) revealed that the percentage of respondents who received a full rent payment from their tenants plunged to 55% in June from 83% in February. Almost 20% had vacant rental properties due to COVID-19, while 60% were in a financial position to offer some kind of payment plan for tenants to pay back rent.

Keep in mind that there are at least 15 million properties owned by these small landlords nationwide. Many were in a precarious financial situation even before the lockdowns began. Unless the job situation of their tenants improves, millions of these investors could be wiped out and compelled to throw their properties onto the market. Sooner or later, the piper must be paid.