Submitted by Charles Hugh-Smith via OfTwoMinds blog,
There’s something fishy about this “new all-time highs” rally of 2016.
It’s interesting to take a longer-term view of the S&P 500 (SPX). Looking at a 10-year chart, the decline from almost 1,600 to 667 in the Global Financial Meltdown of 2007-2009 doesn’t look like that big a deal, given the incredible 6-year uptrend since March 2009.
The boost phase of the rally lasted over 2 years, from 3/09 to 6/11, when the Greek debt crisis caused a temporary swoon in global markets.
Once central banks rescued markets (again), the rally resumed, but beneath the trend line.
This rally ran out of steam in early 2015. The marginal new highs in May 2015 and July-August 2016 are not even visible on this chart.
What is visible is a giant megaphone pattern that targets the old all-time high from 2007 around 1,600. A 600-point drop from 2,200 to 1,600 is of course “impossible” due to the Yellen/Kuroda/Draghi Put, i.e. central banks will buy “whatever it takes” to keep markets elevated forever.
Despite the visible “impossibility” of the SPX ever declining 600 points, that’s what the pattern targets.
Even the casual observer is struck by the market’s wild yo-yo’ing since early 2015–rather than trace out a definable uptrend, it’s been a chopfest of dizzying declines and furious rallies.
This is not characteristic of a powerful Bull market. Rather, it is evidence of a Bull market faltering, eroding and being saved by increasingly outsized and visibly desperate central bank interventions.
$180 billion a month of additional stimulus is now required from the major central banks to keep the market afloat. Yet the returns continue to diminish.
What we have is a Red Queen’s Market. The Red Queen’s race refers to running fast just to stay in the same place. In a Red Queen’s Market, central banks must continually increase their level of stimulus, intervention, jawboning, etc. just to keep the markets in the same place.
There’s something fishy about this “new all-time highs” rally of 2016; the declines are deep but the new highs are modest. This is a tired Bull, and a spear tossed from somewhere in the restive crowd could bring it down all too easily.
they have played rhis game for along time started back in the 1960s. im 75 and i know
Central Banks have gone beyond propping up asset prices through monetary ‘policy’, now they are engaging in a fantasy. What do you call a Central Bank policy that creates virtual money and then uses the proceeds to buy shares of Apple or the Nikkei ? When corporate managers did something similar, issue new shares and sell them on the market, existing shareholders called it ‘dilution’ but at least they received ‘money’ from the buyers of those new shares.
Why even tax corporations anymore? A Central Bank can simply acquire the shares of existing corporations and seize the earnings of the company by virtue of its ( unlimited) ownership. The Swiss National Bank can simply call up Tim Cook and ask that he remit Apple’s $200 billion in cash to their account or he’s finished. Once the company is looted the SNB can dump their shares, receive another windfall and ‘sterilize’ its balance sheet by deleting the ‘virtual’ money it used to fund its pilfering of Apple. Wash and repeat until the SNB and BoJ have extracted every penny of cash and earnings from global stock exchanges!
The problem not only lies with the Central Banks, the bigger problem is psychology. These new highs are directly caused by the perception that CB’s can hold up the markets. In reality, the markets are way to large for the CB’s to prop up. They could realistically only prop about 10% of the overall float. The bigger issue is the perception of the “Central Bank Put” causing everyone to just continue barrowing cheap and buying any dip. This helps the CB’s keep things propped and scaring any shorts (are there any of them left?). The day of reckoning will come when the CB’s continue to prop, but the psychology of the market changes. Then the central banks will literally be feeding a black hole and rally’s will be less and less powerful, and then down right impossible. Then the games really begin.
MARKET: – [noun] Late old English;
A meeting of people for selling and buying.
There are many definitions for the word MARKET. The above is the most definitive, purest form.
As it pertains to the financial “stock market” it no longer applies. These so-called (increasingly run by machines) “markets” contain very little to no price discovery and therefore little to no valuation information, so as to effect a mutually beneficial sales agreement between people.
These financial “casinos” that insist on calling themselves “markets” are nothing more than houses of chance. Where the “odds” are always tilted in favor of the house. You lose. Next!
A year ago today the oil markets crashed down to 10 year lows and sent people scrambling. The jobs reports and other economic data were also dismal. Things looked to be going in a negative direction. We were even lurching into the dreaded “triple top” which even your average joe can recognize as a pretty bad thing.
The printing presses are running wide open and the bankers are frantically stacking even more cards atop this miserable House we have built ourselves.
It won’t take much for it to all unravel.
Shortest comment: “S.O.S”
Same old shit..
Muck