by David Stockman, David Stockman’s Contra Corner:
I keep hearing that the “Chicken Little’s” are once again being proved wrong. We keep being shown chart, after chart, after chart, after chart how the market recovers from perilous sell-offs. This is expressed as “proof” the “market” doesn’t want to go down, and has legs to vault ever higher.
Cause for concern is being dismissed by the hordes of next in rotation fund managers, economists, Ivory Tower academics, or Nobel Laureates as they themselves stampede to any available cameras, microphones, or keyboards that will quote them as saying “See…all that worrying is for naught. And expressing anything other is strictly for the gloom and doom crowd.” Which they then will triumphantly state: “Which has been wrong over, and over, and over again.”
My response is this: Then why is nobody buying it? (e.g., the market) Figuratively, as well as literally.
If one looks at any credible volume report, the participation rate as to those “buying” into these rallies, which by the way, are the result of a previous fall instilling (once again) a near death experience. It rivals that of a BLS report. i.e., great headlines – just don’t look at how many people are actually “participating.”
I have another question: Why can’t the markets proceed any higher than when QE ended in Oct/Nov of 2014? You know, if this is truly: a fundamentally based bull market that is.
Or, is it that – its fundamentally full of bull? I believe it’s a big-ole-pile of the latter, and little to none of the former.
Put a different way: Explain why does it take more central banker intervention, or the promise thereof, to stop these falls? If it were all “fundamentally” based on market principles, again, why is there a need or call for even more monetary interventionism? (i.e., negative interest rates, “helicopter” styled moves, etc., etc.)
Regardless of what is touted (or worse actually taught) as reasoning by this crowd. One fact remains: without the central banks it all falls apart, precisely for the reason that there is no fundamental reason for the markets to be at these heights to begin with. Period.
It’s all an illusion, and it gets proven more as fact every time there’s a hiccup. So much so that now if hiccups aren’t dealt with in immediate triage in the form of some ready to be administered monetary antibiotic. A little discomfort is primed to turn into a terminal failure.
Let’s all remember a few details that are quite conveniently forgotten by far too many…
In 2010 then Fed. chairman Ben Bernanke unleashed a policy of monetary intervention which only a few years previous would have been hailed as ludicrous by this same crowd now calling for more of the same. That intervention is now in the history books called quantitative easing (QE) and its raison d’être was for moving the capital markets.
Just imagine bringing up this issue, let alone proposing it circa 2006. i.e., The Federal Reserve along with other central banks around the globe should (and would) purchase government debt and other such vehicles in an ever evolving aggregate of instruments they deemed proper, at any time. I’m of the opinion (and with good reasoning) you would’ve had this same cohort of economists, academics, et all who are still vociferously calling for more, more, and more – laughing and deeming even the notion as preposterous. However, that is not where we find ourselves today. All that previous hilarity has now become accepted monetary policy
If one is to be truthful, looking at these same charts which are flagrantly used and pointed to in “mission accomplished” type fashion as to show the efficacy of monetary intervention, then I’ll agree; there is only one conclusion, and it’s called: perversion.
In 2010 thru 2014 with the introduction, as well as the reinstatement of further intervention (e.g., QE 2, 3, Twist, et al) the markets went on a rocket-ship ride straight up with nearly a correction. Ever! Then once QE was officially halted (but the tailwinds of “reinvestments” remained) the “market” has done nothing but stutter at best – and more than once – given way to panic-stricken sell-offs. It seems the “market” can rise no higher without further accommodation, nor remain there either.
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