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Jeremy Grantham highlights the eerie parallels between this year’s sharemarket gyrations and the bursting of previous sharemarket super bubbles.

If legendary investor Jeremy Grantham is right, we’re now entering the vicious, and most brutal, phase in the collapse of the “super bubble” in share, bond and house prices.

His warning comes as a deepening sense of gloom is gripping the US sharemarket, which has now fallen 9.2 per cent since the bear market rally peaked in August. It is down 18.5 per cent so far this year.

European sharemarkets have suffered even heftier losses, falling by more than 25 per cent this year. Analysts are warning that the European shares have further to fall, as the region’s energy crisis intensifies.

And the local share market has dropped to the lowest level in seven weeks, as investors worry that synchronised tightening by the world’s major central banks will choke global growth and reduce demand for commodities.

At the same time, growing inflation fears have sparked a savage sell-off in US bond markets, with the yield on benchmark 10-year bonds climbing to 3.35 per cent, while the yield on 30-year bonds has surged to the highest level since 2014.

Yields on risky junk bonds and leveraged loans have pushed sharply higher, as investors worry about the growing risk that debt-laden companies will default on their loan repayments.

The 2022 bear market rally has followed the same template, with the S&P 500 clawing back 58 per cent of its losses from the June low to its intraday peak on August 16.

It is, Grantham argues, “looking eerily similar to these other historic super bubbles”.

But these bear market rallies only allow investors a brief respite, before the fourth and final stage of the super bubble, when fundamentals deteriorate and the market plunges to a new low.

Could be a good time to do cash and gold ...

best
the gnome

Lower quality advice for lower fees? No thanks
SAME OLD RUBBISH, GETTING WORSE

“Lowering standards to lower fees” is the proposed approach to reforming financial advice?..THE NEW SUGGESTION FROM THE NEW GOVT?!

That’s a strong “Hell to the no” from me.

See, there’s a review underway, covering financial advice.

And boy… as you can tell, WE have some thoughts.

Apparently, if reports in the Australian Financial Review are to be believed (and there’s no reason not to) the review is going to recommend that financial advisors no longer have to apply the ‘best interest’ test, when giving financial advice.

Whoa! WTF!!

If these changes go through, financial advisors would no longer have to ensure their advice was in the clients’ best interest?

Think about that for a minute.

Imagine being a doctor, and not having your patients’ best interest as your number one obligation.

Or a lawyer, and not having to act in the best interest of your client.

And yet this review is (apparently) about to let financial advisors act in some other way?

Apparently ‘good’ advice will now be enough.

Goodness me!

Maybe, after a decade or so, the industry is about to win, putting itself ahead of its clients again?

Oh, they don’t actually say that.

They say they’re worried that advice isn’t affordable enough.

See, having to act in clients’ best interest is apparently too expensive.

And if they don’t have to do that any more, they can make advice cheaper.

Sure, it may not be in our best interest any more, but at least it’s affordable.

If that sentence doesn’t strike you as completely absurd, you need to read it again.

Apparently the options are:

-- We’ll do what’s in your best interest, but it’ll be expensive; or

-- You can pay less, but we can’t promise the advice is in your best interest

Frankly, I’m not sure I have the words.

Some people will say the administrative burden of the ‘best interests test’ excludes those who can’t afford the fee.

I’m sure that’s right. After all, most financial advisors are driving 15-year old Toyota Camrys, right?

A cheap shot? Maybe.

And they're not bad guys and girls. Frankly, they're right -- the admin burden is a debacle.

They're not wrong about the problem.

But it's the proposed solution that stinks.

See, there IS a problem.

But it’s not the one you think.

It’s not the ‘best interests’ duty that’s the problem.

It’s the fact our system is so bloody complex that so many of us need advisors! NOW why is that?!!!

the gnome.

Thanks Cowichan

The Australians are very straight out about their views (that is until they turn into pollitcians), and known for it (and we wont mention Juian Assange, nor Rupert). I recently joined a comfortable board of Directors in a UK listed company, and apparently transformed what was a "tea and bickies" affair, to a very rowdy and unruly board, where there was plenty of "frank discussion". The SP of the company has moved up in unsion with the amount of debate in board meetings, and thats they way it should be?!

Aside, Cransfields comments on St Barbara are in line with mine. In fact I would go one firther and certainly not invest in St Barbaba!
The notion that a pre-revenue explorer, Genesis with a $400 million market capitalisation could seek merger equivalence with St Barbara would have seemed fanciful in July 2018, when the latter was one of Australia’s top five gold miners with a market capitalisation of more than $2.2 billion...now worth about $750m

But after peaking above $5 per share in July 2018, St Barbara shares had slumped to just 75¢ by June 30 following a tough period in which it issued $490 million worth of scrip to help fund what turned out to be a failed $768 million acquisition of Canada’s Atlantic Gold.

Permitting delays have rendered the Atlantic assets impotent and the unravelling of the acquisition has coincided with St Barbara making slower than expected progress on refurbishment of the Gwalia mine (no mean feet at the depths they mine !!! and explore at) and slow progress on a plan to expand its Simberi mine in Papua New Guinea (not the safest of jurisdictions and has a few issues in itself to be polite).

“Having done extensive DD [due diligence] on each other’s assets we can see operational synergies that can pair the right rocks with the right mills and the right skills with the right mines, to provide operational levers to de-risk assets to the benefit of shareholders and deferring or ultimately eliminating material capex [capital spending] in this hot inflationary environment. MARVELLOUS TURN OF WORDS, BUT ITS THE TURNS OF EARTH THAT ARE THE REAL MEASURE

“Consolidation not only makes sense, it is actually being demanded by our shareholders. Good grief, do they know what they wish for?

“We may have lit the fuse on consolidation in the region, but from my personal perspective, the timing or structure of such deals is less important than actually getting deals done.

“We have time and capital with over $100 million in our bank account. We will remain patient and disciplined on our overarching five-year strategy, which we are only four months into.” Very glad none of my money is involved in this strategy, or in either companies.

There are better bets

best
the gnome

The argument presented in main stream media is more of the same, as we have seend from them for decades. Littered with hyperbole and Hysteria, politics, the odd culture war, with a generous helping of wise celebrities and the odd loud 15 year old expert. Sales are sales.

The climate debate as presented in media is not balanced nor argued on best balanced science. Even a small helping of Geolgical Science, would show some points of interest.

- The Earth[‘s climate always changes, and will continue to do so, and the forces that causes those changes are such matters as the "wobbles of the earth" in its imperfect orbit
– Climate change is in fact normal, and in fact we are living in times of unsual stability. The odds suggested by the 4 billion years of geolgical changes, that we are overdue for a change
– Climate change occurred well before humans were on Earth, in fact we have only been on the earth for a very small part of the earthes life!
– The rate of climate change today is no different from thousands, millions or billions of years ago. There are various powerful forces , like (internal) Volcanoues, changing magnetic fields, (external) sun radiance, chaning distance from the sun, earth wobbles - some regular, some not, etc
– >80% [of the] time, Earth has been generally warmer and wetter than at present, or in the case of the Sahara desert cooler and wetter, in the Atacama desert (no rain for a few 100 years?: About 10,000 years ago, the Atacama was more humid and less hostile to human life than it is now. It attracted nomadic groups who came to hunt and collect food. Fast forward 4,000 years, the land dried up, gradually transforming into the landscape as we know it today
– Ice is ... rare except for the ice age when we had kilometers thick ice packs on the europoean content and UK, not to mention the hige glaciers that scraped and scoured Canada's landscape - leaving lovely tills, which we sample to find gold!
– Just because [climate] change occurs in our lifetime does not mean that we humans are driving the change, change has obviously happened without us, regularly and irregularly.
and so on ....
https://www.desmog.com/ian-plimer/
https://www.quora.com/Do-we-have-conclusive-evidence-that-humans-are-the-root-cause-of-climate-change

As advertised previously best to avoid the main stream hysteria machine for true news and just find the relevant scientists online, go with the times.

ASIDE: We used to have a a great newspaper in Victoria called "THE TRUTH", .... In 1987 one-time Liberal Party leader Sir Billy Snedden died in unusual circumstances. Snedden died of a heart attack in the Rushcutter Travelodge, possibly whilst having sexual communion of sorts with a mystery woman whose identity has never been revealed. Snedden was known for his 'extra-curricular' activities, and in the words of his son, Drew Sneddon, Billy Snedden "got around a lot."...read much more in the TRUTH!...LOL

all good fun, pardon the

Norway’s $US1.3 trillion ($1.9 billion) sovereign wealth fund posted its steepest-ever first half loss as big bets on tech backfired.

The Oslo-based fund, the world’s biggest, lost $US174 billion of its value in the six months ended June 30, its biggest on record in currency terms. It lost 17 per cent on stocks, which comprise the largest share of its investments, and 9.3 per cent on fixed-income assets such as bonds.

There are hordes of zombie companies in Oz and US that have had their business models predicated on the availability of cheap money, which no longer exists.

Many of these borrowers relied on the high-yield or sub-investment grade bond markets for liquidity. As the cost of capital associated with sub-prime finance soars, many borrowers that could not get finance from the traditional banking system will face the spectre of default...so there will be some spring cleaning!!!

The big news in August is that the Brisbane and Gold Coast housing markets have given up the ghost after defying gravity for a few months. Adelaide is not far behind. In the first 18 days of August, the 0.74 per cent decline in Brisbane house prices has outpaced the 0.67 per cent loss suffered in Melbourne.

Sydney remains the epicentre of the housing crash, with dwelling values slumping another 1.24 per cent in the first 18 days of the month. Home values in Australia’s largest city have plunged 6.5 per cent in 2022. They have been falling at a 19 per cent annualised rate since the RBA’s first rate increase at the start of May.

Negative house equity on the menu again...

and in GOLD MandA, another sad story unfolding in an iconic gold minig company..St Barbara
Mr Cranfield said he had no confidence in the St Barbara board’s ability to handle mergers and acquisitions after the $780 million acquisition of Atlantic Gold in 2019, which was partly funded by a bungled equity raising and was impaired by $248 million within two years of purchase.

The impairment was taken because of permitting delays and the realisation that the cost of building Atlantic’s cluster of gold projects in Canada’s Nova Scotia province would be higher than originally expected.

“They have spent $780 million of shareholder money and didn’t do adequate due diligence. That is just mind-bogglingly reckless in my opinion,” Mr Cranfield

PLenty of Oz Mining Companies have run into Canada, trumpets blaring, to now having to sound strategic "re-thinks" Stupidty in the mining industry knows no bounds

best
the gnome

All does not appear well in Camelot.

Consider all those high-brow economic models, the amount of brainpower employed — not to mention the huge store of data and experience — we can draw upon.

But our success rates in anticipating problems seem to be on the decline. When it comes to solving them, the situation is even worse.

Perhaps the reason isn't quite so mysterious. Just like religion, the theories around economics can be interpreted in whatever way best suits you. And the mdoels they have , have got so many degrees of freedom they are massively illconditioned and can be used and abused by all manner of theories. And, in an era when rational debate and a desire for consensus have been displaced by a polarising dash for the extremes, economics has become a turbulent battleground.

Take the debate over wages right now.

If you believe most business and bank economists, we're on the edge of an abyss. Just like in the 1970s, they argue, we are in the early phase of a debilitating cycle of spiking wages and prices that threatens our future and without firm action to stamp it out pronto, we'll be doomed.

It's an argument thoroughly embraced by the Reserve Bank of Australia, along with every other central bank. In a rare display of unity, all of them are in a panic, pushing through interest rate hikes at lightning speed to plunge a knife into the heart of what they fear most, inflation.

There's just one minor detail they appear to have overlooked. Things have changed since the 1970s, a lot.

Wages aren't soaring. And they're unlikely to. They might be rising at the fastest clip in seven years. But they have come off the back of the slowest growth in history and, in real terms, they are plunging.

Oz is in for another interest rate hike, which if not coupled with a wage increase will mean lower disposable incomes, and economic slowdown, to be polite. Busineses can give wage increases as there are no productivity increases, in fact there are massive productivity declines, due to covid induced work absences, government induced slowness in supply lines, and people being happy to work from home when they want... etc.

interesting times ahead, when the spin can't spin anymore BS

the gnome

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