I think I've called this stock market bubble way too early

The real heist [of this Pandemic Recession] was not GameStop, or American Airlines, or any other single stock going up. It was, rather, that all stocks went up, and thereby hustled trillions of dollars into the higher income brackets in the process.

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I've made about 5% on my bet that long-term interest rates would go up.  I'd shorted long-term bonds, and their prices have declined, because long-term interest rates have started moving up.  I mean, long-term interest rates had nowhere else to move but up, they were the lowest they'd ever been.

Yet, I've been thinking stock prices have nowhere else to move but down, and I've consistently been wrong for months.  Again, it's the only trade I've lost money on.  Although stock prices are historically high, they aren't the highest ever, the highest ever in the US was 1999-2000.

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The S&P 500 returned 18% last year, while GDP declined 3.5%, the largest decline in GDP since the 1930s.  I was wondering, is this normal, for stock prices to increase while GDP falls?

In 2009, GDP fell 2.5%, but the S&P returned 26%.  Oh ...

In 1982, GDP fell 1.8%, but the S&P returned 22%.  Oh ...

So it is normal for stocks to climb when GDP falls by > 1%.  Oh ... the reason this was the only trade I lost money on, was that I failed to look at history.  Instead, I was trying to think rationally about an irrational stock market.  I thought -- prices are overvalued, and we're in the middle of a pandemic recession, so of course prices should fall.  Nope.

Why the hell don't stock prices fall during bad recessions???

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When do stock prices fall then, if they don't fall during bad recessions?

The last big fall in the S&P was in 2008, down 37% for the year.  Anything special about that year?  There was a massive banking crisis that caused a massive liquidity crisis.  GDP was flat for the year, technically in a mild recession.  Interest rates declined quickly.

Previously, stock prices fell for three years in a row, 2000-2002.  GDP was up each of those three years.  But interest rates declined quickly during that three year period.

Before that, we just didn't see stock prices fall > 10%, not for decades, you have to go back to 1973-1974 to find another bear market.  GDP did fall 0.5% in 1974 after booming in 1973.  Interest rates were very high.  This was the OPEC recession, when the US lost control of oil prices, because the US hit Peak Oil production and had to rely on imports for the first time.  Oil prices nearly tripled.

Wait ... oil prices nearly tripled right before the 2000-2002 bear market.

And oil prices nearly tripled right before the 2008 bear market.

So what do these bear markets all have in common?

Oil prices were skyrocketing, the Federal Reserve responded by pushing up interest rates, and then the financial markets ---broke.  Those were your last three major bear markets in the US.

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Sure, a Pandemic Recession is an outlier, something none of us have lived through before.  And we did have a sharp decline in stocks last March when Quarantine began.  But then the Federal Reserve dumped $5 trillion in new cash into the financial markets, and the US Congress spent an additional $4 trillion, and the stock market quickly recovered to hit new highs.

This was the only recession of my lifetime that wasn't intentionally caused by the Federal Reserve.  It was instead an accidental recession.  I expected a bear market to result, but one that lasted longer, the stock market collapsed overnight and then recovered overnight, hardly giving me a chance to reposition my retirement account to take advantage of the lower prices.  And now the stock market is firmly in Bubble Territory.

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So now I'm thinking, after looking at history, what's going to kill this stock market bubble will be a combination of higher oil prices and higher interest rates.

Right now oil prices are sort of back to normal in the $50s after they plunged to zero at the beginning of Quarantine.  And this return to normal hasn't spooked the Federal Reserve at all, overnight interest rates are still the lowest ever, 0.1%.  Long-term interest rates are creeping up, now that commodity prices have returned to normal, because the bond market expects the Fed will eventually begin increasing overnight rates, maybe 18-24 months from now.

History is often a poor guide to the stock market.  But one thing I've learned about bubbles is that they can continue for years after I've identified them.  So here's my history-infused scenario for what lies ahead:

The vaccination campaigns in the rich countries gather steam during 2021, achieving herd immunity by the end of the year.  The economy grows during 2021 across all the major rich countries.  The trillions of dollars, euros, pounds, and yen locked in people's savings accounts because they've got nowhere to spend it begins to flow.  Employment increases, but prices increase even faster.

We begin to see inflation hit levels rarely seen over the past thirty years -- over 4% inflation.  At first everybody shrugs it off, because demand is returning to normal after Quarantine.  But the price increases are not temporary, they continue.  Oil prices climb, as do electricity prices and other key commodities.  After a couple years, we're looking at oil over $100 again, and if you thought speculation was getting out of hand in 2021, wait until you see 2022 and 2023.  Everybody is bidding up prices of everything to levels never seen before.

Reluctantly, the Federal Reserve has to start increasing interest rates.  But it waited too long, now it is behind the curve, inflation is hitting 5%, then 6%, and the speculation in everything gets worse than the dot.com bubble, worse than the housing bubble, now the Fed has to start slamming on the brakes with large and frequent increases in interest rates.  The bond market crumbles, nobody in their right mind would lend money at current rates when rates are going up again next week.

Then, finally, BAM, the bubbles pop.

So, yeah, stock prices could go up another 50% from here over the next couple years.  Commodity prices could double or triple.  Bonds will crash.  Who the fuck knows what happens with BitCoin.  And then the Fed will finally call the cops and raid the party.  Probably before the end of Biden's first term.  He'll end up being "another Jimmy Carter" who presided over large deficits, increasing inflation, and increasing interest rates.

And in 2024 I'll be telling everybody I know to register as a Republican to vote against Trump in the Republican primary, as the only way we'll be able to save our democracy from the Trump Restoration.

meanwhile

I had an enjoyable "mental health evening" :-)

Although I opened a bottle of wine we didn't finish it.  I read some fiction from the 1950s, ate a delightful vegetarian delivery dinner and had some pleasant conversations with T, and then was in bed by 8:30pm.

I woke very early this morning, though.  My sleep hours are all over the place during Quarantine.  I'm napping more often, going to bed early more often, staying up late more often.  My life was more regimented before, when I had the daily commute of at least an hour each way.

Today it will be sunny and most of the sidewalks are already clear of ice, so I'll try running this afternoon in between work meetings.  I already stretched this morning before breakfast.  Then tomorrow morning should be weight lifting, my arms should have recovered from the snow shoveling by then.

T & B made their weekend plans -- T is going to B's apartment on Saturday, so I get Saturday night to myself at the house.  If I want Friday night to myself also I could go to the condo for one night, T sounded OK with that idea last night.  He may want some time to himself before seeing B.  I'll decide on that tomorrow morning.

25 days since my last orgasm, and I'm in the horribly perpetually horny stage :o)  Without the hope of a "yes" from the Oracle this time, without the hope of a "yes" from anybody for an unknown period of time.  Trying to make this final stage of Quarantine different from the previous stages, by doing this to myself.  There was Stage One when I was seeing K every couple of weeks and sometimes he'd let me have orgasms with him.  There was Stage Two when K moved away and I switched to the Oracle (under a newly designed set of rules, more difficult than the previous time I consulted the Oracle) and had pretty good luck with it.  Stage Three came after I spontaneously and unexpectedly defied the Oracle and had an orgasm anyway ... so I wanted to tighten the rules further, and after some hilarity came up with the current Freezer Boy situation.

This morning as I rested in bed my cock was as hard as it can get inside the Leopard and all I wanted to do was unlock it and stroke it and cum.  But the keys are inside a block of ice.  And now T knows it, he asked me what was in the freezer and I told him.  He presumed that I have a Sir, and I didn't correct him, but I don't.  It's all me right now.

I hadn't thought about how I was implicitly punishing myself for quitting the Oracle by wanting to "throw away the keys".  In retrospect it is more obvious that I was reacting to my inability to follow my own rules.  If I couldn't wait until receiving permission to cum, then I shouldn't get to cum at all.  But how?

Other than throwing away the keys to the Leopard, I could give them to another human for safekeeping.  One of you local readers offered to hold onto them for me.  And I'm sure I could drop them off at Ben's house for safekeeping, he'd love that.  I guess that's the next step if the freezer doesn't work as sufficient deterrent.  Then I'd have to beg with another human to please let me have them back, and then travel to see him if he agreed.  Thinking about this turns me on, LOL.  There's also an intermediate step, I could leave the block of ice at the house when I go to the condo, or vice versa, depending on which location has the most risk of me breaking the rule.

So ... let's think on that point.  I broke the rule at the house.  Yeah, I was unlocking at the condo while intoxicated, but I also wasn't so interested in having an orgasm while intoxicated.  Like most guys, it is more difficult for me to cum if I'm drinking alcohol.  I was at the house and sober when I had the unlawful orgasm.  Keeping the keys inside a block of ice should be deterrent against using them while intoxicated.  Keeping the block of ice at the condo should be deterrent against using them while at the house.  Plus I spend more time at the house, so the condo would be the better deterrent.

OK, assuming I go to the condo tomorrow, I'll take the keys there and leave them there.  I'm not worried about chafing anymore, I've been wearing the Leopard long enough and during every sort of activity, it's fine.

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Oh, if I get the house to myself on Saturday, that's when I'm cutting my hair!

I've thought about trying to do a "longer on top, tapered on the sides" kind of haircut, and I read a How To article ... but I still think it would be easier for me to do that in the future if I start with a #3 all over butch cut.  Then as my hair grows back out, I could continue to keep the sides at #3 (or even #2) while letting the top grow out, while learning to taper it with a #4.

I think I will be totally happy to go back to having a professional cut my hair after I get the vaccine.  But I want to try this.  Even if I hate the result.

Saturday!

Tunnel in the Sky

Occasionally I've been rereading Heinlein's ancient novels, they're quick reads and fun and somehow get me cryin' like the old softie I am.  This time it was Tunnel in the Sky (1955), I started reading it yesterday after I quit work.  Despite going to bed early yesterday, and cooking dinner tonight, I'm already finished.  Heinlein's works are no Mars Trilogy, I don't feel my brain overflowing after a few pages, nope, I can slam through these books in mere hours.

Although by today's standards we'd consider this book to be racist and sexist, by the standards of 1955 it was quite progressive, and the main character was a black adolescent who ended up in charge of a small settlement of humans on a far away world.  Heinlein always attacked the issues of prejudice head on, from the context of his place and time, writing about the evils of slavery, also writing about strong & intelligent women who had no need for men to rescue them.  But Heinlein didn't wipe out gender, his women loved men, loved having sex with men, and loved having babies.  In his later novels, most of his characters would be described today as bisexual, but that still didn't mean gender dissolved in his writing -- his women were strong, intelligent, independent, but still essentially feminine in certain ways.

Heinlein's politics would be difficult to categorize today.  Some might think he was a libertarian, and he was definitely skeptical of government.  But he would never have signed the Libertarian Pledge.  Mainly because he was a veteran who was strongly pro-military.  He frequently portrayed disabled veterans in a positive light, and designed his future societies as warlike as any in history.  But Heinlein was also a democrat and believed in civil liberties.  The trick to understanding Heinlein's politics is that he believed a strong democracy required a powerful and revered military class to protect it from the rest of humanity, even to protect it from itself.

Might may not make right, but without might you're doomed, in Heinlein's universes.  He'd never sign on to gun control measures.  But he strongly favored education of the young, and charity toward the poor, and giving people second chances.  He had a strong work ethic, but also believed in the importance of play and creativity.

In a lot of ways, Heinlein's characters were role models for me growing up.  It's a pleasure to go back and read his novels all these years later.