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U.S. Bubble Insanity – Jeff Nielson

by Jeff Nielson, Sprott Money:

U.S. equities indices, particularly the Dow Jones, have been hitting new, all-time record highs nearly every day, for seven weeks. Isn’t that great? Not exactly.

It is great to see a legitimate equities market reaching new highs, based upon positive sector/company fundamentals, or simply based upon robust economic growth. Unfortunately not one word of that previous sentence can be applied to either U.S. equities markets or the U.S. economy itself.

In terms of the fundamentals, even the market-pumping Corporate media can’t hide the fact that U.S. equities are ridiculously expensive, although those talking-heads try very hard to do so. They acknowledge that with over-priced U.S. equities currently trading at a 17:1 earnings multiple that this is very, very expensive. But these devious mouthpieces try to minimize this fact by comparing this bubble ratio to the 14:1 ratio which has been the “average” over the past 10 years in U.S. markets.

What the deceitful Corporate media leaves out of its pseudo-analysis is that the U.S. equities markets have been bubble markets, not just for the last 10 years, but for several decades. If we go way back in time to when we used to receive legitimate market analysis from the media and its “experts”, it was widely acknowledged that equities became expensive as soon as they exceeded a 10:1 ratio.

Modest exceptions were made for high-growth sectors and/or companies, but the 10:1 rule-of-thumb was a benchmark in market analysis. By that metric, U.S. equities are presently overvalued by approximately 70% . The Dow shouldn’t be flirting with the 20,000 level, it should be doing a limbo dance beneath the 10,000-level. But don’t try to tell this to the pie-in-the-sky pumpers of the U.S. media.

One of the favorite means by which the Corporate media lies-with-numbers is through what market charlatans call “technical analysis” – pretending that fundamentals don’t count, only prices. Via the chicanery of “T/A”, market ceilings become floors, magically. Just observe as the charlatans explain their “science”:

The Dow’s 20,000 mark represents a major milestone on Wall Street and some investors believe that piercing that level would signal the recent rally may continue. The Dow first hit 10,000 in 1999.

“To have enough energy to push through that barrier would mean there’s a lot of buying power in the system,” said Brad McMillan, Chief Investment Officer for Commonwealth Financial Network. “Once we do crack through, that ceiling will tend to become a floor .” [emphasis mine]

It’s just that simple – when you live in a fantasy-world where fundamentals don’t count. As long as the “T/A” remains positive, U.S. bubble markets should go higher, so sayeth the “experts”. And it’s easy for the market-pumpers to peddle their shameless cheerleading when they are backed by the nearly omnipotent, market-manipulating trading algorithm operated by the crime syndicate known as the One Bank .

As has been explained in a previous commentary , research is just beginning on the obvious manipulative potential of these automated trading algorithms. Yet researchers have already produced evidence that:

75% of all U.S. equities show obvious signs of algorithm manipulation; and
This market-manipulation shows evidence of being “correlated”, i.e. all of this market-rigging is being perpetrated by a single Invisible Hand.

This research is a significant understatement, however, since the researchers were only looking at simple forms of algorithm manipulation. There was no effort made at looking for broader manipulation of U.S. markets (and other markets) via automated trading algorithms. Indeed, despite the researchers finding “correlation” in this manipulation, there was no suggestion on their part that it was all controlled by a single entity – which is precisely what is implied by such correlation.

Had the researchers been looking for a Master Trading Algorithm (i.e. an algorithm which manipulates 100% of equities) they would have found it, since this is precisely what is implied by the behavior of these markets. One day the stocks all go up together, the next day they all go down together.

This is absolutely impossible in legitimate markets. Legitimate markets diverge, as equities are supposed to move independently, based on the unique/individual fundamentals of each company, and based upon the varying degrees of strength in their sector(s). Only on days of particularly important or powerful news should these markets ever move upward or downward collectively.

Instead, what we see day after day, week after week, month after month, and year after year is near-perfect choreography. These individual companies march upward or downward collectively, like they are all attached to a single, gigantic yo-yo via an invisible string. That “invisible string” is the One Bank’s Master Trading Algorithm.

“Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth.”

– Sherlock Holmes (i.e. Sir Arthur Conan Doyle)

The quote above has been immortalized because it is much more than the musings of a fictional detective. It expresses a tautology of logic. If you eliminate all possible answers except one, then that one possibility must be the answer.

It is impossible for markets to move collectively. Our markets do move collectively. There must be some “invisible” means of coercing these markets to move in this impossible manner. The only possible way to move thousands of equities collectively, day after day, is with computerized automation. Previous commentaries concluded that such manipulation existed, even before the evidence emerged which has proved it, because this is what was logically implied by the (impossible) manner in which our markets now move.

However, market manipulation is literally only ½ of the equation when it comes to explaining the bloated, festering bubbles in U.S. markets. The other half of the equation is money-printing, the conjuring of more funny-money than has ever been attempted in human history. Regular readers are familiar with the “math” here, it starts with the Bernanke Helicopter Drop.

Over a span of five years; B.S. Bernanke quintupled the U.S. money supply. During that time, he conjured into existence more than $3 trillion of additional U.S. funny-money. But that is literally just the tip of the monetary iceberg. Along with the fraudulent “printing” of all this U.S. currency, B.S. Bernanke also had a fraudulent interest rate policy : “0% interest”, i.e. free money for all of his Big Bank Masters.

Read More @ SprottMoney.com

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