I was reminded of something I wrote a while back when all this craziness started. It’s probably more relevant today that ever…
“Markets right themselves with pain… That’s Capitalism.
Back room manipulation to avoid pain only increases the severity of the pain to be felt down the road.”
© 2012 Mark St.Cyr
As anyone remembers when working on their own cars before they became computers knows the old sage “If it ain’t broke, don’t fix it.” So why are the media channels full with tantalizing teasers to make sure you’re tuned in to hear how once again a problem that has supposedly been solved 375.83 speeches ago is in need of another speech to tell everyone it’s once again solved?
For quite awhile now I have written (some might argue pontificate) that the Euro crisis has never been settled regardless of what has been expressed throughout the financial media outlets. I can not help myself but to break out in sheer laughter when someone argues with either myself or in a discussion with the talking heads on television that the crisis has been averted. Or as one buzzer banging commentator used to say “That issue is off the table!” I say to that...”Really?…Oh Really?”
The markets have gone on an incredible run over the last week. Yet, is this run attributable to anything positive? You hear, “Earnings are coming in once again better than expected!” Although that might be true what were expectations? If you’ve been paying attention the bars were lowered from where they stated originally by many. Also in relation to these lowered bars, the bars being set for next earnings “beats” have been lowered still. Economic numbers whether credible or not have been nothing but lack luster. People whom are honest looking at the data points agree on one theme. They’ve been dismal at best. And here we are with the markets in the same areas set in 2007 when to everyone’s knowledge or thoughts the gravy trains would run forever. But we all remember what happened later don’t we?
According to reports less than 50% of reported companies have actually beat their revenue expectations. To further shed light on that which in my view is the most important of figures, they have also once again lowered the projections going forward. Or to say it differently, not only did they not meet these lowered numbers, but the numbers ahead are going to be even lower. China’s earnings are missing the mark. Greece is still in free fall economically. Spain as of last week seemed to be in free-fall in respect to its interest rates, and yet the market rallies towards new highs for the year. How can all this bad be so good for the markets? Easy…Remember the Wizard of Oz? It’s all the financial education one needs to know in today’s market. Commonsense, business prowess, balance sheets, CEO’s acumen, along with any $200K education in business. All of it, irrelevant. The only thing that matters is what a politician or central banker says over tea or tee time.
Some like myself will argue that the markets are no longer functioning as the bastions of free enterprise they were designed to be. They are broken and need to be repaired. They are currently a modern-day Frankenstein creation waiting to turn on its creator at any moment. Just when that moment is – is anyone’s guess. But what’s just as dangerous as the creation are quite possibly the actual creators themselves because of the one fact that has yet to materialize. Losing control of the abomination.
Why would they do anything different if all they have to do is talk about how they talked about resolving an issue they discussed before to resolve the issue they think might be discussed to make plans in preparation to put in place plans that are to be discussed and finalized at a date that are due any moment that the discussion on whether or not action is needed should be discussed? Because that seems to be working just fine. So I guess “if it ain’t broke don’t fix it” continues.
Till it doesn’t.
© 2012 Mark St.Cyr