<< Read More: Goldilocks, R. I. P. (Part 2)
<< Read More: Goldilocks, R.I.P. (Part 1)
The first law of Bubble Finance is that stock market crashes trigger recessions, not vice versa. That stands your grandfather’s macroeconomics on its ahead, yet the casual chain from which it arises is straight forward.
To wit, in a world of Peak Debt ($230 trillion globally), central bank money pumping mainly inflates financial bubbles. Such bubbles eventually reach blow-off extremes and then burst, thereby sending stock (option) obsessed corporate C-suites into paroxysms of restructuring and downsizing designed to appease the trading gods of Wall Street.
The main street sacrificial lambs thus tossed overboard—-workers, inventories, plants, stores, warehouses, other “redundant” fixed assets and CapEx outlays—are what we are pleased to call recessions nowadays.
Needless to say, you can’t see these bouts of C-suite mayhem coming if your dashboard is still cluttered with your grandfather’s macro-monitors. That is, the junk data from the BLS and Commerce Department.
By the same token, you will most surely espy Goldilocks prancing through these incoming data reports because at this late stage of the business cycle they are really nothing more than a read-out on capitalism’s inherent impulse to trudge forward until it is monkey-hammered by the central bank and its imploding bubbles.
That is to say, the next recession is embedded in the stock charts because they are the Bubble tracker in plain sight. And here is the leading indicator at the present moment—-the utterly lunatic trading metrics for Amazon (AMZN).
As the current bubble metastized after the immediate post-recession rebound in the stock market, the momo crowd piled into AMZN because the “price action” was just plain awesome. Between the March 2009 bottom and January 2017, the stock soared from $65 to $750 per share or by nearly 1100%. And it did so without any regard for AMZN’s profitless prosperity—perhaps signified by its 170X PE multiple at the end of 2016.
The again, when it comes to miracle stocks and the Great Disrupters, profits are–apparently–a matter of will, not performance. If Jeff Bezos wanted profits, the true believers insist, he would will them. Simple.
Still, since the beginning of 2017, even the willpower meme has begun to get way in front of its skis. During the past 14 months, Amazon’s market cap exploded by $400 billion—-rising from $360 billion in January 2017 to $760 billion at present. At the same time, its LTM operating free cash flow plunged from a meager $9.5 billion ( on $136 billion of sales) to just $6.5 billion during the year ending in December.