Transitory Peak Market Crash
By Ernie Varitimos
June 13, 2022
0:00 / 25:55
Transitory Peak Market Crash

Hey, how's it going? This is zero days to expiration podcast, episode number 92. And the reason for tonight's episode is to take a look at the market going forward now, right now, if you're. If you've got a chart in front of you, you can obviously see that the futures are down.

You're not down huge, but the down significantly about 1.4% on a Sunday night, that is remarkable, quite frankly. And of course, when the market opens up tomorrow morning, if prices stay where they are, the SPX is going to gap down significantly. That will be the second gap. Huge gap down that the SPX will have consecutively from Friday and also today.

And I quite frankly, I've never even seen the size of the gap down on Friday, going back in history maybe well years. And of course, all of this is because of. The transitory peak inflation. I say that in jest because of course we heard the idea that inflation was only transitory actually going way back.

They were attempting to keep inflation down below 2%. It started to rise. They ignored it. They talked it down. They said that it was all transitory and it just kept on rising and rising. They kept on pointing to core inflation as if ignoring food and energy and just concentrating on those things that they call core would give us some insight as to where inflation would go.

Of course, they were wrong there as well. To this day, they are looking at core inflation and also looking at commodities and saying that, in fact, there are some people talking about us going into a deflationary cycle while inflation is at its highest point in more than 40 years. Of course, if you were to calculate it the way they did 40 years ago, We would be blowing their, those inflation numbers away now 40 years ago.

And here's the other problem. When you start talking about comparing older dates to this date, you get a lot of folk saying that the not comparable, there are too many differences in our economy. And I would say, yeah, that, that is correct. But they will say it to try to feign that somehow we're in a better situation.

When in fact we're not, we're in a much worse situation and we're taking a more dovish approach. I don't know how else to put it to solving this problem than they did back then when their inflation numbers weren't as bad as they are now, back then. The then head of the fed Volker, he put the pedal to the metal and raised interest rates dramatically.

And yes, it did send us into a recession. We're going there one way or another. There's just no doubt about it, but we could do it the easy way, or we could do it the disastrous way back then. They raised interest rates dramatically much more than what we're proposing these days. I think there was one hike as much as five or 7%.

It was just crazy. And I remember back then back in the eighties you could buy a 30 year bond with, 15, 16, 17% interest. People were getting mortgages with 15% interest car loans with 20%. I mean that, that is just we're all used to over the past decade or decade and a half of everything sub 3%.

And so this is a whole new world for people, if in fact that they capitulate and actually raise interest rates the way they need to it's either that. And they talk about this kind of soft landing that we're going. Yeah. We're things are bad and market's coming down. We're probably going to go into bear territory, but it's going to be a soft landing and we're going to escape.