by Andy Hoffman, Miles Franklin

This past week (I’m writing Saturday afternoon) was a perfect “new normal” period, in which essentially all news flow was violently negative, yet TPTB made sure “markets” suggested otherwise. To that end, I last month discussed how “oil, Greece, and the Fed” were the three most dangerous near-term market factors; and since then, the headwinds surrounding all three are significantly direr, with no end in sight.

In Greece, to call this week’s Euro Group meetings an unmitigated disaster would be the understatement of the century, as it devolved into name calling, petty threats, and Greece trying to pull the wool over its creditors’ eyes. Even perma-cheerleader Barrons‘ headline this weekend blares “Greece needs a miracle to avert financial disaster”; while sadly, it’s not just Greece, but the entirety of Europe. And trust us, when the inevitable “Grexit” occurs – likely, by summer’s end – the political, economic, and social ramifications will be as “unmanageable” as they are catastrophic.

In the oil markets, the newly formed, U.S. government led “oil PPT” – whose footsteps have become as blatant as the gold Cartels’ – is desperately attempting to “save” the only industry that has produced (high-paying) jobs, profits, and economic growth since the 2008 financial crisis. That said, WTI crude is still just $57/bbl, down 50% from last summer’s peak; and given the high cost, massively leveraged nature of the majority of shale producers, one of the top executives at Weatherford International – an oilfield service company I covered for many years on Wall Street – claimed at least half of all U.S. fracking companies will be bankrupt by year end.

Despite the largest rig count plunge in U.S. history, lower 48 oil production remains at a record high level – and is expected to remain there for months to come, given the utterly massive inventory of uncompleted wells waiting to come on line. Meanwhile, U.S. crude inventories aren’t just at an all-time level, but have literally surged “off the charts.” And each day oil prices remain this low, the pressure on financially strapped frackers to monetize those wells becomes stronger – particularly in light of U.S. government tax incentives set to kick in this summer. Meanwhile, OPEC kingpin Saudi Arabia not only is producing at its highest level ever – from its highest ever rig count – but claims to have zero inclination to reduce production any time soon. Throw in the likelihood of perhaps 1.5 million barrels per day of Iranian oil hitting the market later this year, and you can see why Exxon Mobil’s CEO this week predicted oil prices would remain subdued for several years. Which, frankly, would simply keep them in synch with the horrific supply/demand imbalances of essentially all industrial commodities; including lumber, aluminum, coal, and iron ore.

And then there’s the Fed, which this coming Wednesday has yet another “momentous” policy setting meeting. At its March 18th meeting, the Fed set “new lows of idiocy and cluelessness“; in validating the “most unequivocally dovish FOMC statement in memory” – issued by Whirlybird Janet in her February 24th “Humphrey-Hawkins” Congressional testimony – yet kowtowing to the horde of Wall Street/MSM “recover-ists” by taking the word “patient” out of the actual statement. In its place, they simply said ‘consistent with our prior stance of being patient, we don’t expect to raise rates at the April 29th meeting’; but given that the economy has since weakened dramatically – mythical “bad weather” and all – they have put themselves in the odd corner of having to say at each meeting that they won’t raise rates at the next. In other words, unless the 120 taxpayer funded lackeys at this week’s meeting can wordsmith a better way to dispel the notion of an imminent rate hike, yet continue to hold out hope of its possibility, the odds-on favorite for this week’s language will be “consistent with the near-term concerns noted in our March 18th policy statement, we don’t expect to raise rates at the June 17th meeting.” Of course, how they handle the topic of low oil prices, Greece, and the ambiguous “other factors” they have cumulatively blanketed to be “transitory” is another issue altogether. Not to mention, as – “coincidentally” or not, the first look at first quarter GDP growth, which their own tracking model has pegged at ZERO – is scheduled to be published at 8:30 AM EST, just 5½ hours before dissemination of the updated policy statement.

And then, of course, there’s the newest “pink elephant” in the room; i.e., the massive, 1999-like equity bubble the Fed has inadvertently catalyzed. Or more accurately, the Fed, the ECB, the BOE, the SNB, the BOJ, and the PBOC. Even the Venezuelan stock market has gone parabolic, Weimar Germany style; and it’s only a matter of time before the real losses being “enjoyed” by Venezuelans, care of the collapsing Bolivar currency, are shared by citizens of “first world” nations like those in Europe, Asia, and North America.

Again, here at the Miles Franklin Blog, we can’t emphasize enough that we are NOT financial advisors; and thus, NOT making market predictions or recommendations. And when it comes to global equities – and sovereign bonds, for that matter – when we claim conditions are ripe for the “crash to end all crashes,” we are simply referring to the aforementioned real losses that will inevitably be visited on the most objectively overvalued markets in history; as inevitably, no matter how much money Central banks print – or how much “support” markets are given, overt or covert – “Economic Mother Nature” always asserts herself, and always wins.

That said, at some point one would have to be silly not to acknowledge that not only have equity valuations exceeded the 1929, 1987, 2000, and 2007 highs amidst the worst economic environment of our lifetimes, but so has margin debt, M&A activity, and countless other tell-tale signs of a speculative bubble. And whilst retail participation in the U.S. (and likely, Europe and Japan) is near all-time lows – explaining CNBC’s lowest ever ratings – in China, it has now reached full-blown mania proportions. Frankly, had I seen what I’m about to show you when I wrote last week’s “one chart that says it all” – of the parabolic growth of financial “bubbles” in general, as measured by valuations two or more standard deviations above normal – I would have had to re-write the article entirely. As, care of the People’s Bank of China’s complete lack of “sophistication” in managing bubble inflation, in just nine months’ time – amidst the utter implosion of China’s economy – it has replicated the entire experienced of late 1990s America, and then some.

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