Oh this is getting rich.
Bonds are getting bid hard here in the US and stock are in the toilet.
But it was all fixed, remember?
No, it was not fixed. The LTRO didn’t fix anything. It hide the stinking dead fish under the carpet, which are now growing maggots and have turned into a public health hazard.
Spain has a 20% unemployment rate and cannot solve its problems either. Nor can Italy. Nor can Portugal.
For the same reason we’re not solving ours. All are refusing to admit that the government cannot spend more than it taxes in current time.
There’s only one solution folks. It’s found there. None of the political candidates or central bankers are talking about it because if they do then they have to recognize that fixing it in the US will cause an immediate deflationary depression as the air comes out of the bubble — the government is borrowing and spending close to 10% of GDP right now. Any act that corrects that will instantly come out of both GDP and cause the liquidity-driven asset-price bubble to deflate. This of course is called “bad” while stock prices going up due to nothing but hot air is called “good.”
That’s backwards, incidentally.
The market is doing what it always does. It will let you pull this crap for a while, lead you on, think everything is ok, suck you back in, have huge rallies that then have every tout in the world on TV telling you how you’re going to miss a huge profit, and of course you’ll be late.
You bought into Apple at $600, the DOW as it crossed 13,000, the S&P as it crossed 1400, with riches dancing in your mind as you drift off to sleep.
What’s actually happening is that you’re chasing profits you believe will be but there will be no profits. The liquidity-driven pump-and-dump game is one of the oldest on Wall Street. As some say, high prices cause even higher prices and this is true when borrowing is free or nearly so — for a while.
But then someone realizes that what you’ve really seen is nothing more than multiple expansion. One or two companies, or maybe three or four, or even a hundred that are going up a lot in their alleged “earnings power” and driving the stock market higher.
Then one of those “someones” has an “accident.” In 2000 it was MicroStrategy, a little company that had gone up like a rocket ship and then announced an accounting problem. Their stock tanked. But shortly thereafter, people started to ask questions.
Lots of questions.
Questions like, “Is there really any actual earnings power behind these stocks or are we all selling to a new bagholder at ever-higher prices? And by the way, are there any more bagholders around?”
The result was a horrifying crash.
I will note for everyone that we were at 1422 in the SPX just a few days ago. Now we’re at 1366. You do the math.
Is this a “big dip”?
No, not really.
Just wait until Apple cracks. Take $50, $100, $200 off Apple and tell me where the Nasdaq 100 trades. Sit down first.
Oh I know, it can’t happen. It certainly can’t happen before the election because Ben won’t let it, right? Except that it not only can, it always does. It did in 2000 and it did in 2008. You got warnings in 2008 too, just like we did this time. Last summer and early fall were your warning, but you had to jump back in, right? You bought all the way up — straight up, without any meaningful correction or consolidation, because trees grow to the sky.
I have one question for you:
How’s your base-jumping skillset look like, and oh by the way, is that a parachute or a knapsack on your back?