The stock market has reached new all-time highs this week, just two weeks after plunging over the BREXIT result. The bulls are exuberant as they dance on the graves of short-sellers and the purveyors of doom. This is surely proof all is well in the country and the complaints of the lowly peasants are just background noise. Record highs for the stock market must mean the economy is strong, consumers are confident, and the future is bright.
All the troubles documented by myself and all the other so called “doomers” must have dissipated under the avalanche of central banker liquidity. Printing fiat and layering more unpayable debt on top of old unpayable debt really was the solution to all our problems. I’m so relieved. I think I’ll put my life savings into Amazon and Twitter stock now that the all clear signal has been given.
Technical analysts are giving the buy signal now that we’ve broken out of a 19 month consolidation period. Since the entire stock market is driven by HFT supercomputers and Ivy League MBA geniuses who all use the same algorithm in their proprietary trading software, the lemming like behavior will likely lead to even higher prices. Lance Roberts, someone whose opinion I respect, reluctantly agrees we could see a market melt up:
“Wave 5, “market melt-ups” are the last bastion of hope for the “always bullish.” Unlike, the previous advances that were backed by improving earnings and economic growth, the final wave is pure emotion and speculation based on “hopes” of a quick fundamental recovery to justify market overvaluations. Such environments have always had rather disastrous endings and this time, will likely be no different.”
As Benjamin Graham, a wise man who would be scorned and ridiculed by today’s Ivy League educated Wall Street HFT scum, sagely noted many decades ago:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
Short-term traders can make immediate profits using momentum techniques, following the herd, and picking up pennies in front of a steamroller. Remember your brother-in-law who was getting rich day trading stocks in 1999? Remember your cousin who was getting rich flipping houses in 2005? Remember The Big Short, where the Too Big To Trust Wall Street banks were getting rich creating fraudulent mortgage derivatives and selling them to suckers? There are always profits to be made for awhile. Then the bottom drops out, because fundamentals, cash flow, valuations, and reality matter in the long run.
Lance Roberts points out some inconvenient facts, and I’ll point out a few more.
“It is worth reminding you, that while the markets are moving higher and pushing new highs currently, it is doing so against a backdrop of weak fundamentals, high valuations, and deteriorating earnings.”
History might not repeat itself, but it certainly rhymes. Late in 2007, as the housing collapse was well under way, the stock market hit all-time highs of 1,575 in October. The bulls were exuberant, even as the greatest housing crash in history was evident to everyone except Bernanke and Paulson. Corporate earnings were falling. Valuations were at levels only seen in 1929 and 2000. The so called “doomers” like Hussman, Shiller and Schiff were warning of an impending crash. Very few heeded their warning. In retrospect, the economy was already in recession by December 2007 despite economic reports saying otherwise. GDP and other falsified economic indicators were revised negative years after initially being reported as positive. Familiar?
The stock market dropped 20% from the October high by March of 2008, as Bear Stearns collapsed and struck fear into the hearts of the Wall Street sociopaths. But the Fed and their Wall Street puppeteers needed to keep the game going a little longer so they could short their own fraudulent derivative creations and screw over their clients once more. JP Morgan, which was just as insolvent as Bear Stearns, bought them and restored confidence in the ponzi scheme. The market proceeded to soar by 12% over the next two months. All was well!!! Until the bottom fell out in September. By March 2009, the market had fallen 58% from its October 2007 high.
The market topped out in May of 2015 at 2,126. Since then, corporate profits have been in freefall, consumer spending has been in the toilet, GDP has been barely positive, and virtually every economic indicator has been falling. Valuations are now higher than at the 1929, 2000, and 2007 peaks. The median existing home price of $239,700 is 55% higher than the median price in 2012. At the peak of the housing bubble in 2005/2006 the median price to median wage ratio reached 9.5. In 2012 it had fallen to a reasonable level of 5.6. It currently stands at a bubble like level of 8.3.
The market meandered about for the next seven months going nowhere. It then suddenly dropped in January and February, falling 13% from its May 2015 high. This was unacceptable to central bankers around the globe who believe stock market gains are the only factor reflecting the health of our economic system. Maybe it’s because they are only beholden to bankers, oligarchs, corporate chieftains, corrupt politicians, and unaccountable bureaucrats. Central bankers from around the world have come to the rescue by buying stocks and providing unlimited liquidity to banks and corporations so they can buyback their own stocks. The result, is new record highs.
It has the feel of JP Morgan “rescuing” Bear Stearns and saving the world in early 2008. Smoke, mirrors, negative interest rates, debt creation, money printing and the artificial elevation of stock valuations by central bankers and their politician co-conspirators is not creating wealth. It is creating epic bubbles in stock markets, bond markets, home real estate markets, commercial real estate markets, and automobile markets. John Hussman chimes in with a reality based assessment of their reckless actions:
“Instead, central bankers seem to view elevated security valuations as “wealth.” The longer this fallacy persists, the worse the subsequent fallout will be. I have little doubt that future generations will look at the reckless arrogance of today’s central bankers no differently than we view speculators in the South Sea Bubble and the Dutch Tulip-mania. Unfortunately, there is no mechanism by which historically-informed pleas of “no, stop, don’t!” will penetrate their dogmatic conceit. Nor can we change the psychology of investors.”
Today is just a continuation of the bubble blowing policies of the Fed and their central banker cohorts at the ECB and BOJ. These policies are deranged, illogical, and always result in the destruction of real wealth. Promoting financial engineering, while destroying the incentive to save and invest in the real economy has gutted true investment in our country. This is why good paying jobs have disappeared and we are left with the gutted remains of decades of financialization and globalization. As Hussman points out, our real economy has died a long slow death, drowning in debt.
“One of the hallmarks of the bubble period since the late-1990’s is that the growth rate of real U.S. gross domestic investment has slowed to less than one-quarter of the rate it enjoyed in the preceding half-century. Yet because central banks have stomped on the accelerator at every turn, the quantity of outstanding debt has never been higher, and the combined value of corporate equities and debt (“enterprise value”) is now at the highest multiple of corporate gross value-added since the 2000 bubble extreme.”
Artificially boosting stock prices through convoluted liquidity schemes, devious machinations, backroom central banker deals, sending Bernanke to Japan, and helicopter money dropped on Wall Street only, has just exacerbated the wealth inequality permeating the world. The anger over this blatant pillaging by the .1% who rule the world is reflected in the chaos across Europe and the brewing civil war here in the U.S.
As Hussman notes, no wealth is being created because no productive investments are being made. Mega-corporations buying back hundreds of billions of their own stock to enrich their executives is not a productive wealth creating venture. We are in the midst of a sickening crisis created by appalling incentives, driven by sociopathic corporate and political leadership captured by their greedy desire for power wealth and control. The sickness is pervasive and terminal.
“In a healthy economy, savings are channeled to productive investment, and the new securities that are issued in the process are evidence of that transfer. In an unhealthy economy, and particularly one with very large wealth disparities, a large volume of securities may be created, but they are often simply a way of supporting debt-financed consumption. As a result, no productive investment occurs, and no national “wealth” is created. All that occurs is a wealth transfer from savers to dis-savers. Over the past 16 years, U.S. real gross domestic investment has crawled at a growth rate of just 1.0% annually, compared with a growth rate of 4.6% annually over the preceding half-century. There’s your trouble.”
A chart that caught my eye this week, along with dozens of other data points from the real world, reveals the phoniness of the stock market rally and the underlying weakness of this tottering edifice of debt. We are supposedly in the seventh year of an economic recovery. Corporate profits have been at record highs. Interest rates are at record low levels.
The Fed and the FASB have colluded to allow banks and commercial real estate companies to fake their financial statements and pretend their assets are worth more than they are and to pretend rental income from non-existent tenants in their malls and office buildings can cover their debt payments. And somehow delinquencies and charge-offs are soaring by levels seen during the height of the 2008/2009 financial crisis. It seems all those vacant mall storefronts and all those FOR LEASE signs in front of every other commercial building across America are finally coming home to roost.
This faux economic recovery has been driven by debt, with much of it subprime. The shale oil scam was built on high yield debt and false promises. The Wall Street banks reported fake profits for years by relieving their loan loss reserves created in 2009. Now the table has turned.
The three largest banks in the US—Bank of America, JPMorgan Chase, and Wells Fargo—disclosed that the number of delinquent corporate loans increased by 67% in Q1.
- JPMorgan’s delinquent corporate loans increased by 50% to $2.21 billion
- Bank of America’s delinquent loans increased 32% to $1.6 billion
- Wells Fargo’s delinquent loans increased by 64%, to $3.97 billion
The banking industry added $1.43 billion to the total money it has set aside to cover bad loans in Q4 2015, according to the FDIC. Making bad loans to deadbeats can make profits look spectacular in the short-term, but interest and principal can’t be paid with a cool business plan and a narrative. Cash flow is a necessary ingredient to servicing debt in the real world. The fun has just begun. Fitch Ratings just reported that the default rates for junk bonds rose to 3.9% this month, up from 2.1% in April 2015.
The “tremendous” auto recovery which drove sales (I use the term loosely since 31% of sales are actually leases and the rest are financed over an average of 67 months) from 10 million in 2010 to 18 million in 2015 has been completely driven by easy money provided to Wall Street. It’s amazing how many vehicles you can sell by doling out $350 billion in 0% loans and allowing “buyers” to finance 100% of the purchase.
When they started to run out of legitimate suckers who liked being perpetual debt slaves, they used the tried and true method that worked so well with housing in the mid-2000s – loaning money to losers who weren’t capable of repaying them. This Wall Street mindset is driven by the free money provided them by the Fed. You borrow from the Fed at 0%, lend it to deadbeats at 12% for 72 months so they can “buy” that $40,000 Cadillac Escalade and boost the economy. Over 20% of all auto loans are now being made to subprime (aka deadbeat) borrowers. Now the shit is hitting the fan belt.
Serious Delinquency Rates for Auto Loans by Term
| Risk Tier | |||
| Loan Term | Subprime | Prime | Super prime |
| 49-60 months | 22.4% | 3.4% | 0.4% |
| 61-72 months | 22.8% | 5.0% | 0.9% |
| 73-84 months | 30.7% | 7.1% | 1.8% |
Financing 100% of overpriced automobiles, extending terms, pretending you will get repaid, and recording it as a sale is the corporate/banker method of creating wealth. Auto loan terms between 73 and 84 months more than doubled between 2010 and 2015. One quarter of all loans originated in Q3 2015 were between 73 and 84 month terms, compared to just 10% in Q3 2010. The average new-car loan rose to $29,551 during the fourth quarter of 2015, up more than 4% over the past year, according to Experian, one of the three major credit-reporting agencies.
The chickens are coming home to roost for subprime auto lenders and investors, with Fitch Ratings warning delinquencies in subprime car loans had reached a high not seen since October 1996. The number of borrowers who were more than 60 days late on their car bills in February rose 11.6% from the same period a year ago, bringing the delinquency rate to a total 5.16%. Subprime lending always ends in tears. Wall Street is probably betting against these packages of subprime slime while simultaneously selling them to their muppet clients. History rhymes.
These subprime auto loans look positively AAA compared to the hundreds of billions in subprime student loans distributed like candy by Obama and his government minions to artificially lower the unemployment rate and again boost the economy. Student loan delinquencies are already skyrocketing before the $400 billion doled out in the last four years has come due. The official delinquency rate reported by the government of 11% is another falsehood. The delinquency rate is really 17% when loans in deferment and forbearance — for which payments are postponed due to any reason — are included. The taxpayer will eventually foot the bill for at least $400 billion in losses.
![Student Loan Delinquencies are Sky High [Chart]](http://2oqz471sa19h3vbwa53m33yj.wpengine.netdna-cdn.com/wp-content/uploads/2016/06/student-loan-debt-chart.png)
We’ve been borrowing from the future for the last 16 years because real economic growth was killed by Greenspan, Bernanke, Yellen and the rest of the Fed yahoos. The stock market has returned 60% since the 2007 peak, three times the growth in corporate profits and GDP. The all-time highs in the stock market have been driven by the $3.4 trillion increase in the Fed’s balance sheet, hundreds of billions in stock buybacks, PE expansion, and ZIRP. The valuation of the median stock is now the highest in history.
For all I know the stock market could continue to rip higher. Madness knows no bounds. The general public is not involved in this madness. They were wiped out twice in the space of eight years. Wall Street and their media mouthpieces have been unable to lure the average Joe back into the casino because the average Joe has been impoverished by Fed policies designed to benefit the .1%. The Wall Street lemming herd has gone mad, but I’m not sure they will recover their senses before they burn the entire demented financial system to the ground. But enjoy the all-time highs while they last.
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” ― Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds
There’s only 1 reason the central banks are jamming this market higher: to ensure the election of their candidate.
Since they have one running in both parties, that shouldn’t be difficult.
What Martin Armstrong’s program predicted might be happening. Where people lose confidence in governments, and stop buying any gov debt. The capital has to go somewhere so it goes into privately held companies.
This article reminds me of the scene in The Big Short when Dr. Michael Burry (Christian Bale) did the financial analysis and couldn’t understand why, month after month, his investment wasn’t yielding a positive return, contradicting the principles of mathematics themselves. It led him to eventually understand the entire system was fraudulent. I thought the train would have hit the wall by 2012, or definitely in 2015, and certainly in 2016 (as it did in the 2008 election year). I’m flummoxed it’s gone on as long as it has (as I’m sure many of you reading this are as well). It’s as if the principles governing nature, across the spectrum of life, have been suspended since 2008. Yet I continue to watch. And wait.
John Angelo, welcome back. I’ve missed your cogent comments.
Prophetic words
The USA has become a state as a result of liberal ideas and various other factors , through financial monopolies too.But they will never be a nation :They will always be the scene of INTERNAL DISTURBANCES ,IDEOLOGICAL , RELIGIOUS , ETHNIC and RELIGIOUS RIVALRIES . THE USA WILL BE OVERTAKEN BY EVENTS… Adolf Hitler , Chicago Tribune February 15 ,1931.
In other words , the only thing holding this house of cards together is GREED and Fear . When we do collapse financially what will hold this nation together ?
Isn’t it amazing Adolf Hitler could see in 1931 what was going to destroy us.
Slightly off topic, but Adolf Hitler was no prophet when he had to assess the US as a nation. After Pearl Harbour he declared war on the US, thinking it was a divided, decadent country that would not be able to put up a decent fight against the Japanese or his own troops. We all know how that ended.
His words may now seem prohetic, some 85 years later, but that is not because this western predicament was baked into the cake from the beginning. To the contrary, the US and most of the other so-called first world countries have had plenty of opportunity to change course, especially these past 15 years when it became obvious that we were fatally undermining our financial system, the very basis of our just in time economies.
Reality is about to teach us a lesson because we are entering phase 2 of this self-induced storm. For what will happen when the first supplier decides to wipe his *ss on the letter of credit or the currency he receives, realising the buyer is no longer good for it? And then this same fear starts popping up all over the world? Credit is key to grease an economy, too much of it is dangerous and taken to absurd levels, it simply becomes gangrenous.
It won’t be pretty.
History rhymes and the future is almost here. When the rent finally does come due someday soon, no doubt we will all look back and recall these times as “the good ole’ days”.
There appears to be no other way but forward at this point. And, as the Swiss philosopher and poet, Henri Frederic Amiel, once said:
“Destiny has two ways of crushing us: By refusing our wishes and by fulfilling them.”
So I think I’ll just keep stacking gold and silver and sit this one out.
Don’t forget the lessons of Venezuela and other hellholes around the world.
In the end it’s all about food. If it gets bad enough, it is currency
Make it, take it or trade for it.
If you make it, someone(s) will try to trade for it, if they’re desperate enough. They’ll try to take it.
If you can’t protect it, it was never going to be yours to begin with….
I might just have put fifty or a hundred bucks into this stock market thing some day. You gotta be in it to win it. Dollar and a dream.
I felt all along that the script included running the Dow up as close to 20,000 as conditions would allow. Looking at this sham of a market, can you see what fools people are to take it seriously even in times when there SEEMS to be some legitimacy to the game. I stopped feeling sorry for the muppets a long time ago as I believe they get what they deserve for being so gullible and stupid.
The all time high is the stupidity level of Amerikans.
If you have a retirement account it is probably largely or fully in stocks and if it is in stocks this is what is supporting it.
The market collapses, your retirement collapses.
Have some contingency ready in case it does or you may find yourself out on the street.
I cannot take the obvious plan for those in power to favor the top ten percent
The entire goal is to prop up assets by a public entity when the private market is not working due to the natural laws of supply and demand
The low interest rates mean the government believes we will have low growth
The Anerican public understands that message
Those in power understand it too but continues to manipulate the pricing of assets by introducing masses of money
Then math takes over for when more money comes in than goes out, it looks like demand exceeds supply
I recently received a call from my hyundai dealer where I bought a 2015 in august of 2014 when they first came out. They asked me if I was interested in trading in my car for a 2017 this month .I asked why they were so interested in me trading in my car and if they would completely pay off my loan on the original . Lol total silence on that last question . I asked if they were trying to inflate their sales numbers by any means necessary .Also silence .I find it hard to believe there is an huge demand for 2 year old hyundais especially considering that leases for those are ending after the 2 year period about now .I went past their lot and it was packed with cars absolutely jammed .I sense something big is afoot in the auto industry.
Well, for a while, I thought my prediction of 3000 on the S&P 500 this year would not be met. The better Trump runs in the polls, the higher the market seems to get pushed.
If Trump is ahead or even in the polls at the end of August, the Fed will reinstate QE for the final push to 3000. Count on it.
This certainly has the feel of a blow off top that many have been anticipating. I’ve felt over the last month or so, that the wise guys have been front running “Helicopter Money”, which will be the the banking criminals last resort.
Insiders, however, always tip their hands if you follow the money trail. All asset classes are getting a bid now that the future of the currency is in doubt. Why? Because when you resort to helicopter money, the only result is destruction of the currency, which then ends with inflation and possibly, hyperinflation.
In the meantime, I see PM’s and long bonds getting bid to all-time highs. Gold and silver will be the last man standing, and when the 30 year gets below 1.5% yield, shorting it might be the trade of a lifetime.
If you believe the currency will be destroyed, shorting bonds isn’t the way to play it. PMs are the way to go. Even real estate is problematic since you can’t hide it from taxmen.
The long bond will be sold off long before currency is destroyed. Take the proceeds from the short sale and invest in tangibles such as pm’s, energy, etc.
RT Rider–David Stockman had an interesting article on ‘helicopter money’ which is Bernanke saying, “I’ll do what ever it takes.”
The problem with ‘helicopter money’ is that you can’t direct how it will be used. The idea is that it will be used to stimulate the economy thru increases in consumer spending. But…I say to you that given today’s sentiments concerning debt that a lot of that ‘whirly bird’ money will go to retiring debt. I would love to pay off my $100,000 morgage if Yellen is so kind as to drop it in my lap. Give their phony money back to the bank, I say. But it will come with strings, I suppose, you have to buy a 60″ flat screen TV, made in China. I have truly fallen down the rabbit hole.
Has anyone thought out the consequences of a helicopter drop in terms of HYPERINFLATION? Didn’t think so! But then again, maybe that’s what Yellen and Obama want. hmmmm. That would pretty much toast the debt along with everything and everyone else.
Everything that I ever need to know about economics, I learned in kindergarten. I call it the ‘teeter totter’ economic model. On one side of the teeter totter is ‘demand’ and the other side are ‘goods’. Both side must be in balance, the teeter totter neither going up or down. But when Roger Pincus, a rather brutish sort of fellow, a rumored holdover from the fourth grade, gets on one side of the teeter totter, I go up on the other side. That’s the way the economy works. When balanced you just sit looking at each other like when I was on the other side looking at little Becky Farnsworth, my heartthrob.
So, when ‘demand’ (credit created by the FED) pushes one side down because there is so much of it and it’s heavy, prices for ‘goods’ on the other side goes up. It’s called inflation (downside) and price inflation (upside). The whole job for Yellen is to keep you from realizing that you’re up.
There are two ways to bring the economy (teeter totter) into balance. One is to retire credit, cut demand (more about that later), or to ‘grow the economy’ (increase goods). I remember Sen. Rubio coming out on national TV and saying, “We need to grow the economy.” I almost laffed myself silly. When do you hear that anymore. NEVAH! It can’t be done. Socialist governments destroy economies not create them, which is why they always come after ‘free marketism’ sometimes called ‘Capitalism”. For those that are wondering what that last sentence means check out Venezuela.
The other way to balance is to cut ‘demand’. How do you cut demand, you ask? Deflation, Hyper-inflating the money supply, price controls, misstating COLAs, confiscating your 401K and IRA, forcing you to put your retirement into government bonds payable to you in 30 yrs., bail-ins, or killing you outright, anything that prevent you from getting ‘goods’, get it?. Anything that shrinks your demand.
What you are going to see is either one or both of the above. Everything that the FED and government say is ‘white noise’ and gaming the system. You can get lost in the unimportant details, but this is the whole canolli. Gee! This economic stuff is easy.
As a side note! ‘Goods’ are scarce and in limited supply, I wish I could say the same about ‘credit’.
I rarely comment on my comments. BUT…THIS IS F**KING IMPORTANT!!! If you don’t understand the ‘teeter totter’ economy, read the following post by Nelson Hultberg and re-read it over and over until you understand it and understand the implications for you!
http://afr.org/printing-way-prosperity/
RT Rider–Bill Fleckenstein had an article on KingWorldNews about the new term for helicopter money–it’s now referred to as ‘cold fusion’. Cold fusion is a method of endless supply of energy, boundless. I wonder where these terms originate? From the Dark Recesses of the FED, I suspect.
Helicopter money is now an anachronism, having served its purpose. Goodbye, ‘helicopter money. Hello, ‘cold fusion.’
The public is more confused than ever with Newspeak! The purpose of Newspeak is not to communicate, but to confuse.
RT Rider–if cold fusion does happen, Janet Yellen’s printing press will be the closest thing to a ‘perpetual motion machine’ we will ever see in this Universe.
Jim, it’s even worse than you point out, regarding the sub-prime auto loan bubble.
Many, if not most of these loans are not 100% financing, but are 125% LTV. That’s right, 125%. They will lend you 100% of the final sales price of the vehicle, plus give you 25% of additional financing to pay for the insurance, gas, new tires and maintenance the vehicle will need before the 7-year term of the loan is up.
Is this crazy, or what?
When I saw the title of this post I thought I might have an opportunity to tell a story from my misspent youth.
I’m reminded what a girlfriend said when I told her that I wanted to make passionate love to her.
“What’s stoppin’ you?” She said.
I guess she wanted a little less talk and a little more action.
All-time stock market highs, all-time happiness lows:
Latest Happiness Index Reveals American Happiness at All-Time Low
http://www.theharrispoll.com/health-and-life/American-Happiness-at-All-Time-Low.html
IMHO, the increase in new car sales was a direct result of the Cash for Clunkers program which destroyed a generations’s worth of used cars, leaving the middle and lower class no other option but to finance a new car at extreme lengths in order to afford it.
As Markets Reach New Highs, World’s Top Investors Ring Alarm
The big rally in stocks and bonds has some of the world’s top money managers putting up warning signs.
Laurence D. Fink and Howard Marks joined the likes of Bill Gross and Jeffrey Gundlach cautioning that buyers may be ignoring sluggish economic growth and Britain’s departure from the European Union as they look to put their money somewhere, anywhere, amid low interest rates.
“If we don’t see better than anticipated corporate earnings I think the rally will be short-lived,” Fink, 63, said in an interview Thursday.
A run-up in global stocks has added more than $4 trillion to the value of equities worldwide since June 27 on speculation central banks in major economies will boost stimulus. It’s been a swift turnaround from the doom-and-gloom surrounding global equities on June 24, the day after the British vote, when stocks lost $2.5 trillion in market value.
Bond Rally
On the fixed-income side, the speculative-grade bond market that was accompanied by bearish calls coming into 2016 has been on a tear, with gains at 12 percent for the year. But the global market rally, underpinned by low interest rates around the world, carries dangers, Marks, co-chairman of Oaktree Capital Group LLC, said in a telephone interview.
“We are living in a difficult, low-return world that has been ignoring risk incidents,” Marks said. “When the market shrugs off its problems, it is not a plus, as that permits problems to accumulate. Up-cycles don’t go on forever.”
Marks said investors who insist on jumping into less-liquid assets need to be willing to ride out the rough times.
“When you go into risk assets and they go through a tough period, there will be heartburn and price declines,” he said. “If you are going to need the money in the short term, you shouldn’t put it into potentially illiquid assets.”
Janus Capital Group Inc.’s Gross and DoubleLine Capital LP’s Gundlach said sovereign bonds, with yields at record lows, were too risky. Gundlach said in a webcast earlier this week that there’s a “mass psychosis” among investors seeking yield.
“Call me old-fashioned, but I don’t like investments where if you’re right you don’t make any money,” Gundlach said.
Fink, whose firm cut about 3 percent of its workforce earlier this year, has said the Brexit vote will weaken global economic growth and makes another rate increase by the U.S. Federal Reserve unlikely this year.
BlackRock on Thursday reported a 3.7 percent decline in second-quarter earnings as clients shifted money from stocks to lower-fee fixed income and cash investments.
“Our clients are facing unprecedented challenges as they attempt to navigate the current investment environment,” Fink said in the firm’s earnings statement.
This type of investor skepticism is exactly why the S&P 500 Index’s seven-year rally has further to run, according to Laszlo Birinyi, the former Salomon Brothers Inc. analyst who called the post-crisis bottom for U.S. stocks in December 2008.
“If sentiment was more euphoric, we might be more in danger of forming a market top,” he said in a phone interview from Westport, Connecticut, Wednesday.
“The characteristics of the end of a bull market are not evident. Our stance continues to be that the market will go higher.” Heeding the advice of the 72-year-old president of Birinyi Associates Inc. has been profitable during a bull run that has lifted the S&P 500 more than 200 percent.
Admin–I like the way you said, “…stocks lost $2.5 trillion in market value.” Most MSM commentators just say that stock lost $2.5 trillion, today. There is a difference between $2.5 trillion and market value. One doesn’t make or lose money until the stock is sold.
So. How many of the car finance companies are Bank Holding Companies (Fed members) that will be bailed out when the bullshit impinges the blades?
Global defaults hit the milestone century mark last week, a 50 per cent jump from the number of delinquencies at the same point last year and the highest level since the US emerged from recession in 2009.
The number rose by four to 100 in the first full week of July, as defaults in the US oil and gas sector ratcheted higher, according to Diane Vazza of S&P Global Ratings.
That brings the amount that has been defaulted on to $154bn.
Defaults have been paced by lowly-rated crude producers, which have faced difficulties securing new debt financing since oil began to tumble two years ago. That has forced many companies to renegotiate debt obligations with creditors, file for bankruptcy protection or miss interest payments, US capital markets correspondent Eric Platt reports.
Despite a rise in energy prices from lows touched in January and February, with crude up 2 per cent on Thursday to $45.60 a barrel, the commodity still trades below profitable levels for many energy producers.
The latest defaults included distressed debt exchanges from oil group MD America Energy and FTS International, the largest private well servicer in the US, as well as a missed payment by telecommunications group Goodman Networks.
The New York-based rating agency expects defaults by so-called junk rated companies in the US to climb to 5.3 per cent by March 2017, up from 3.8 per cent a year earlier.
“So far, there has been little spillover effect into other sectors, but we are not ruling this out in the coming quarters,” Ms Vazza said. “We also expect this stress on many US oil and gas companies to persist with continued low oil prices.”
And the Dow just keeps going higher and higher today! Up, up and AWAY!
Cheers to all of the intrepid travelers soaring to new heights!
But – again – for those of you with at least one foot still on the ground, consider rolling some of your profits into precious metals outside of your digital, paper-backed portfolio.
Remember, hot-air balloon rides can be a blast, but if you aren’t careful, when it’s over, all that remains are the memories and the printed materials; like brochures, receipts and perhaps a few green-tinted photos of white-haired dead people from time’s past.
“Up” to you…
Admin–I just skimmed your article and the comments. What I saw was a well presented criteria with ample facts to lend substance to your conclusions. However, I feel that many of the dear readers will miss the subtle nuances that can be extrapolated from your post. That can’t be helped as not every reader has the knowledge base in which to make the connections necessary to fully appreciate what you’ve said.
I remind everyone that the stock market collapses from a high. The suckers are lured in to the high. Let’s call them sheep. haha
What I expect is a sudden ‘gap’ down, a waterfall effect. A big drop in a short time frame. I fear investors getting in on a sure thing are riding a log heading for a waterfall.
Muck About may be in a good sector of the market when the waterfall effect hit the market as gold stocks are a thin market meaning it is not well capitalized. There will probably be a rush into tangible assets and yield will be abandoned and real wealth sought after. That’s troublesome though. In a progressive Socialistic agenda, these metal producers may well be nationalized for the good of the motherland. You may well be paid for your shares but in money not worth anything in purchasing power, a ‘shit dollar’ as Jim Willie is so fond of saying.
As a side note! The biggest mistake that our Founding Fathers made is that they used the term ‘dollar’. The dollar became the reality. The ‘nominal dollar’ from the ‘purchasing power dollar’. The ‘nominal dollar’ has become a trap for you and a great boon to the corporate-government state. Daniel Amerman has written about this trap in his blog. He should be required reading for all. The term ‘dollar’ should be abandoned and money should be hallmarked in weight and purity only. If that had happened, you wouldn’t have been so easily fooled by the likes of Lincoln, Wilson, Roosevelt, Johnson and Nixon. The crimes that plague you today would have been none existent. But…deception is the hallmark of all governments and low lifes. HiLlARy fits both of those characteristics. HiLlARy is a character without having any!
http://danielamerman.com/
I’m sorry but I don’t understand your point. A dollar during the time of the Founding Fathers was a unit of weight, no different than an once or gram. Before the abandonment of the gold standard around 1914, a dollar was defined as .048 troy ounces of gold. It would have been incomprehensible to them that a dollar would become a zero maturity liability of a central banking cartel.
I think we all know why the state abandoned gold as a monetary unit. We’ve suffered the consequences ever since, and will continue to do so, until all bad debt is liquidated and market money (most likely gold and silver) made legal.
RT Rider
Of course it was a unit of weight and purity . Dollars became the unit of account which was fine when it defined real money (gold and silver coin) and later had full redeem-ability for paper money substitutes, but it was all nominal dollars terms. A $20 gold piece was thought of as 20 dollars not 1 0unce of gold at 92% pure. A 1 oz. gold piece could buy so much in merchandise. The ‘purchasing power’ of 1 oz. of gold is inherent in the metal A dollar is an intangible term subject to manipulation of its ‘purchasing power’ so that $20 buys less as the nominal dollar is debased. Debasing metal is harder to do.
If the US had stuck to the ‘coin standard’ all would be well, or even fiat paper money redeemable in coin. But that would have stood in the way of expansionist government, Hamiltonian governance.
The Constitution was over ridden when it became difficult for government to live up to the term of that contract with the American people. A lot of people, such as the railroads and governments (Federal and State), wanted an elastic currency as they derived the benefits of an early dollar and paid back debts with a less valuable dollar. That wouldn’t happen with money that was devoid of the term dollar and was thought of as so much gold at some purity.
A dollar can be manipulated, 1 0z. of gold can’t. The Federal Reserve Note has been debased since 1913–97%. That is a loss of 97% of what it could buy. Not only that!!! The fall in prices that would have normally been passed onto the consumer as a result of increases in production, new technology, and distribution has been usurped by the printers of fiat paper money. Primarily the government and its toady, the Federal Reserve Bank. Fiat money was a double whammy!
I hope this clears up my previous comment . Oh. by the way you don’t have to make gold or silver legal. It can stand on its own as it has for 5 thousand years. Only fiat paper money has to be made legal as it’s illegitimate. A pretender to the throne! And…need I remind you of what a crown and throne are made of?
Another excellent, thorough, and accurate analysis!
I agree with Lance Roberts that we are probably in a ‘fifth wave’. Specifically, we have just started the middle wave in the sequence, the strongest part of the wave. Conditions will likely improve from here, in some cases dramatically. Since it is a fifth wave, with all the accompanying distortions one can imagine (seems like a profound understatement), improvement will be spotty and uneven, but noticeable.
It is a continuation wave, and the band will play on for an indefinite period of time, regardless of how off-key the music sounds. Collapse scenarios will have to wait quite a while…
Not to worry about Wall St. I’m sure whichever candidate for POTUS is chosen for us (Hitlery or Trump, now with extra Pence), will succumb to Wall St’s wet dream of privatizing Social Security. The influx of new $’s from the peons will more than handle any downturn.
Alex I will take privately owned central banks for 10 trillion !
AKA POCB’s
Whatever .
Kinda like a doctor that only treats symptoms , OMG lets not treat the underlying problem like a broken leg or nutrition or WTF ever.
Yeah let us continue on with treating symptoms , let us not look at the root problem .
POCB and the owners of said
Let’s not sanitize or legitimize these gangsters by calling them “Central Bankers”. What they are is a privately controlled International Criminal Banking Syndicate waging an economic war against the people of the US, Europe, Canada and other nations of the world. The hub of this treasonous Syndicate is the Federal Reserve which was set up in 1913 in violation of the US Constitution. Greenspan, Bernanke and Yellen are not stupid and know exactly what they are doing which is to suck as much wealth out of the US for the benefit of the gangsters who control them. For this treason, they and co-conspirators should be indicted by a citizens court and when found guilty hung in the public square.
um isn’t that what I said? lol
surely this is common knowledge?
Just another great illustrative article – picked up by ZeroHedge too!
By the way, history ALWAYS REPEATS. What do you think the Four Turnings are all about? Just long enough for people in general to forget what history has to tell you. Happens to be about four 20 year generations plus/minus. When those who lived through the last 4th turning die off, well, gee whiz, along comes another one. We’re there again – maybe half way through this 4th Turning – maybe a little more than that. The Heroes of the last Fourth Turning and The Silents are dying off daily and soon will be gone. That’s a good hint where we are in this set of the next Four Turnings….
Again, history always repeats, it is just dressed differently and has on different makeup. (Also hair styles and dress lengths).
Muck
Muck About, what am I going to do with you? History ALWAYS REPEATS! Say what??? It does not!
It is just a homily, a cliché that we all take for granted without any critical thinking. No thinking required here, folks, move along!
The human mind is a wonderful thing in its ability to ignore reality, create false memories, generally react without thinking, and pay more attention to our own species than to anything else happening on the planet. We are Egocentric and that’s what we pay attention to, us.
As my history teacher said, “History is His story.” Are there cycles? I think so, but how we color events we call cycles ignores a lot of reality just so our beliefs fits the events. Humans like connections and are very uneasy with something that they can’t relate to and the mind tries desperately to connect it to something it already knows.
If it’s not in their belief system, sanity requires that it be ignored.
We’re a herd animal and studies show that we live by consensus to the point of ignoring reality.
Muck About–When we chart the stock market we think we are charting the stock market, but were not. What we are charting is other people and what other people think other people are doing or going to do in relation to a stock.
Technical Analysis used in charting a company’s performance is one thing, charting the performance of its stock is quite another. A stock chart is a visual of past performance. We try and augur the future performance by looking at the past. We have our triple tops, flags, descending and ascending wedges, triple bottoms, trend lines, etc. The only thing we don’t have is why a stock performed as it did in the past. I think that is really important information. That has a lot to do with psychology, manipulation, and political manipulation.
James Dines is the only one that I’m aware of that gave psychological insights with his Dines-isms.
We settle for simplistic reasons for stock performance. The stock went up because of what’s happened or the stock went down because of what’s happened, same reason given.