Another Bucket of Fish for BMO’s Belski

We are 6 years into a 20 year bull run says BMO Capital Market’s CIO, Brian Belski during a CNBC interview on Monday.  I find televised comments such as this to be so blatantly dishonest they border on criminal.  In the same way I find an activist investor being given nationally televised air time to make unsubstantiated claims against a specific company for which they have a position against also criminal.  Impartial opinions are useful while partial opinions are not useful and can be damaging to those not recognising the conflict of interest.  But so let’s look at Belski’s suggestion of a 20 year bull run.  Is this just an honest educated opinion or is this Belski doing his part to perpetuate the manipulation of the financial markets?

I would love to sit down with a guy like Belski.  I mean if he’s just another market tool then whatever, I get it.  Banks absolutely need the market to stay propped up.  With everything else in the economy (and I mean everything) on life support banks recognise that market failure sends us right back to 2008 or worse.  All those collateralised ‘assets’ being passed off as collateral for interbank lending would be rendered priceless again.  And by priceless I don’t mean the touching MasterCard kind of priceless I mean zero bids for the securities being backed by defaulting loans kind of priceless.  I recently had a look at Deutsche Bank’s level II and III collateral assets and well what I found is that just a 20% decline in the bid for those assets will render Deutsche Bank insolvent.  Given that during the last credit bubble burst those assets declined 80% to 100% I would say Deutsche and at least four US banks could not withstand a market collapse.  And the sheer size of these holdings this time around, having increased by about 40% since 2008 mean there isn’t enough ink in the printing presses to cover the losses.

But back to the point here.  If Belski really does believe in another 14 years of daily market highs I want to talk to him.  Because it would mean I have never been so misguided in all my life about something so significant.  Something I thought I had a very strong grasp on.  And all those things I learned over the years including my coursework at Booth Business School have become entirely irrelevant.  Now if I am nothing else, and I may be nothing else, I am a true student of things.  And so I want to learn this new universe with its new set of physical laws that are guiding us.

So Belski I ask for more than those few empty catch phrases used to support your case.  I ask you for a solid explanation of such a bold call in the midst of declining incomes, extreme household debt levels, extreme national debt levels, double digit unemployment, deteriorating demographics, skyrocketing food, rent and healthcare costs, collapsing fixed reinvestment, record levels of government dependents, lowest ever money velocity and corruption so rampant in our legislative system that the constitution has been rendered meaningless.  How does one find the ‘physical laws’ that will drive a 20 year bull run?  Do economic fundamentals no longer apply to the market?  And if so then it must all come back to the Fed?  Actually I suppose that I could understand.  Markets were previously a valuation based on the efficient allocation of a finite resource i.e. earned money.  However, a Fed led market is a valuation based on the infusion of an infinite resource i.e. printed money.

The problem is that Belski in his quick and dirty premises suggests the 20 year bull is based on strong fundamentals.  He claims we’ve had five years of a demand led economy.  I’m not sure what constitutes a demand led economy at his level of the financial stratosphere but down here on earth flooding consumers with underpriced debt to fill the void of natural demand left in the wake of massive wealth and income destruction does not constitute a demand driven economy.  Nor is collapsing fixed capital reinvestment consistent with a demand driven economy.   So perhaps Belski could start with an understanding of his view that we’ve been living in a demand driven economy.

Belski also purports that American corporate earnings are “the most stable assets in the world”.  Again I’m not sure what constitutes ‘stable’ to the kings but for us serfs it means sustainability.  And well the problem with American corporate earnings is that they haven’t come by way of revenue growth or strong productivity, they’ve come by contracting operations, both human and fixed capital.  That is not a shot at CEO’s as I believe they did what they needed to do to simply survive the short run.  The point is that growth through contraction is not sustainable by definition.  Unless, as I’ve pointed out we are in a new universe with new laws and principles that are guiding this new existence.

And so we are back to you Belski.  If you are out there and you are reading this please enlighten me.  For it was you that felt it your place to bring this view to a national audience so kindly follow through with a real explanation of such a bold call.  I understand your initial reaction is that you don’t have time for every nobody who questions your superior judgement and I might agree but so think of me as a metaphor for the millions of households who have suffered through years of wealth and income destruction.  Then perhaps you can rationalize gifting us some of your precious time and knowledge to provide us an understanding of this new universe in which we find ourselves.

But first allow me to explain something to you.  And Belski not to worry, you are but a metaphor for the congress of baboons that attempt to expound the lies.  Going on television which, in and of itself in this day and age, garners you credibility but add on such an impressive title at a top tier bank and well Belski your words are like gospel.  At least to those other seals who also clamber for an extra bucket of fish.  You expound on such nonsense but are cheered on by the barks of support from the other seals who too are putting on their daily performance at FinanceWorld™.  I just want you to know that there are many of us out here that see you for what you are.  We understand your lies and from whence they come.  I expect when you do this day in and day out reality becomes blurred and so perhaps you have lost sight of what you are.  And so you will continue on waving to the crowd for another bucket of fish Belski and maybe it will always be there.  At some point though Belski you are going to come to the realisation that you are nothing more than a well fed seal and I expect that will be just fine by you.

Now Mr. Belski, I apologize for being a bit flippant with you up to this point and I’d like to get serious.  What I’m about to show you is the world outside of your lies.  It is the reality that the vast majority of Americans wake to each and every day.  It explains why people like you sitting on television telling the nation how great things have been for 6 years and that this same great life is going to continue for another 14 years can sound like a death sentence to many.  The reality is many Americans cannot survive 14 more years like the past 6 years.  Please have a hard look at the charts below and you will understand that mathematically they may be right.  Please understand our fear goes beyond ourselves, it goes much deeper.  We see the leaders of this nation refusing to acknowledge the income and wealth destruction taking place but instead touting some make believe existence of prosperity for all.  We rationally expect that if you leaders refuse to acknowledge such things today you will also refuse to acknowledge such things tomorrow.  And so we fear what the world will be like for our children and grandchildren.  I do not expect a response from you Mr. Belski but do have a look at the following and then take a moment to really digest the day to day implications for so many.

median income

Median Net Worth

Median Net Worth 10 to 13

ycharts_chart-2