What Comes Next: Previews Of The Coming Reckoning

All things have a beginning, a middle and and end. And now, more than 3,480 days into the current bull market, the longest in history, we can say with high confidence we are very close to its end.

Why?

For manifold reasons that are multiplying fast. So many, in fact, that each of the key speakers at the recent Peak Prosperity/Contra Corner Summit in New York City had difficulty finding enough time to enumerate them all during the six-hour event.

David Stockman, President Reagan’s budget head and former US Congressman, focused his warnings on the overconcentration of financialized (i.e., phony) profits in the world economy, which mask the steep decline in the production of tangible (i.e., real) value.

Among his long litany of examples of the sclerosis and fraud within today’s economy, he explained how so much of today’s euphoric stock prices are an artifact of the cheap credit made possible by the world’s central banking cartel — enabling a massive LBO of our corporate industry.

Long story short: artificially low rates have been allowing corporate executives, for years, to buy back a huge percentage of their company’s shares, enriching shareholders (most notably the execs themselves) in the immediate term, while saddling the underlying companies under tremendous leverage (1m:13s):

(Purchase the full replay video)

As long as stock prices stay high and rates stay low, no one cares; they’re making too much money. But as rates rise and prices fall, these corporations will become crippled by their debt service requirements, be forced to lay off large swaths of their workforce, and quite possibly go out of business. Failures will ripple across the corporate landscape, sinking the US into prolonged recession.

As a society we’ll be the poorer for it. And suffer the full brunt of the pain this collapse of malinvestment will bring.

But the fat cat execs? They’ll simply retire to their mansions and enjoy their spoils.