Is The Melt Up Over?

When some started seeing a slowdown in international trade, such as a decline in bulk shipping container amounts and rates, both land and sea, in late 2018, many predicted a melt-up in the financial markets before an inevitable meltdown. With the Federal Reserve Bank (FRB) printing money and the Federal Government spending money like never before, I surely didn't bet against it and some even coined it the "Fed Put" In 2019 we saw a huge rally primed by the corporate tax cut, corporate buybacks, and insiders selling.

I'm now thinking the meltup is at or near the top with stocks on average, 26 times earnings with PE Ratios of some of the more popular stocks, way higher. I've just been informed, major supply chain problems have hit the construction industry with some northern contractors even moving to the south because of a lack of building materials. With lumber yards trading materials between them, to try to meet demand, it appears both are adding to price increases as lumber prices have now doubled in just the last two months. With construction starts up last quarter, this is surely going to drastically affect future home prices and sales. Even home appliances are taking 5 to 6 weeks to deliver from what was just several months ago, five to seven days. Are timber prices rising due to inflation, or the lack of supply, or both is a huge question? Surely many businesses are struggling and those who remain in business are going to take advantage of the supply chain issues. Construction is one of the few industries that can't fully be exported and is a primary contributor to GDP. Even rubber gloves and plastic one (1) gallon water jugs for distilled water for the dental industry are out of stock.

As we entered 2020, the FRB started the printing presses for the 4th time since the Great Recession and it was still the pedal to the metal for those literally pushing stock pricing higher with a hand full of stocks on the various indicies contributing to most of the rally, with the broader market lacking any real gains.

If someone wanted to cover up a domestic and international economic meltdown, a plandemic, i.e. an outbreak that did not materialize into a pandemic and one that was easily cured by many countries around the world with the right treatment protocols, it could not have been more perfectly times with the first major sell-off of stocks in 2020.

Now in the 3rd quarter, the major indices have once again hit new records as stock buybacks, coupled with irrational exuberance still appear to be driving up stock prices. The Federal Reserve Bank still has its

printing press wide open and the Government annual deficit will be well over $4 trillion (the highest ever) trying to save our country from what happened in 2008 or worse.

This is surely inflationary over the long term and I suspect, as we start to see the other effects of this recession, another major stock market correction is imminent. Consider the current U.S. total interest paid on the debt $338.4 billion and climbing, is the 4th largest Item in the Federal Budget behind, 1. Medicare/Medicaid 2. Social security and 3. Defense/Intelligence. Now consider as noted above, we have already borrowed another $4.2 trillion just his past year trying to plug the numerous leaks in the proverbial economic damn. Printing money is the only thing left for the FRB to do as they've already exhausted the potential effects of keeping interest rates low.