If there was ever any doubt that the “markets” are nothing more than a HFT (high frequency trading) cesspool of central bank funded front-running; today is that day when all doubt has been erased.
Whether or not one accepts that fact is a choice they have to make for themselves. Only you can decide how long you want to “dance,” as there seems to still be music playing in the casino ballroom.
Why all the dancing and music references? Well, it’s only because I, unlike most, remember 2007 with a little more clarity. To many ’07 is ancient history. To many others – the scars are still clearly visible.
Those scars which now far too many want to brush off as “temporary discomforts” came just after the so-called smart crowd wanted to profess just how solid everything was. Questioning real estate, CDO’s, CDS’. MBS’ _______(fill in the blank) and such was for the “ill-informed” or, for those who “just don’t get it.”
Tuning into CNBC™ at this time was an abject lesson in “It doesn’t get any better than this!” TV. It was boom-time (again.) And just the mere questioning as to how much longer that “boom” could go on was met with scorn, ridicule, and a whole lot more. For those with short memories (or were still in school circa 2000) the tech boom collapse was still fresh in many a business persons mind, not to mention many a 401K balance report..
As the markets went higher and higher in what seemed out of frustration as to answering all the nay-sayers questioning the run, Chuck Prince, the then CEO of Citigroup™, spoke the now infamous line as reported in the FT™. To Wit:
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing”
Yes ladies and gentlemen, that now immortal line was uttered July 9, 2007 And here we are, once again, almost to the day some 9 years later. And we are “dancing” again.
Actually, “dancing” probably no longer fits the description. Maybe calling this a “rave party” is more accurate. For these party goers aren’t dancing ecstatically based on some simple monetary libation. No, these party goers are jacked up on monetary stimulants far more powerful than any bodily ingested chemical reaction could ever deliver. We are now entirely enveloped in the monetary equivalent of central banker “ecstasy.” A monetary stimulant so powerful it would make Timothy Leary envious.
Just to put things into some context, here’s the S&P 500™ as shown via the SPX shortly after today’s open. (click on image to enlarge) To Wit:
I put a few annotations (just for context.) As you can see the peak on the left is the top of the “Dot-Com bubble” and its resulting aftermath. Then, up we go again into the next bubble phase now known as the “real estate bubble.” And right there at the top is where Chuck Prince made his most notable remarks. What follows is what is now known as “The Great Financial Crisis.” So what happened next? Great job creation? Great GDP prints month after month, year after year? Wage growth? Nope. All of it has been nothing more than the ability to front run central bank money printing of trillions, upon trillions, upon trillions of dollars. That has been the only “fundamental” catalyst. Period.
And today? Right there at the tip-pity top is where we currently are. Again, (just for context) we have never, ever, ever, been so high. We’re so high even “Ravers” are saying “Wow man!”
So why are we here? One word “Ben-zai-nomics” What is that you say? Well (just for context) remember how and why we went up here in the first place? Hint: Then Fed. Chairman Ben Bernanke deployed monetary maneuvers in the war against free markets which were once only a thought experiment to be contained within the hallowed halls of academia. Then, (much like Oppenheimer,) Mr. Bernanke unleashed the theoretical to the real world and QE was both created, unleashed, and deployed creating the equivalent of a monetary nuclear reaction to which the markets (and the world for that matter) had never seen. And much like that monetary dooms day weapon – we thought we seen the last of it. Until last night that is.
We now know none other than Mr. Bernanke has been at it once again. No, not here in the U.S., but in Japan. It would seem to be the case that Mr. Print, then Print some more has convinced the finance powers that be, in Japan, to deploy the equivalent of “helicopter money.” The result? Hint: Top of the chart, right hand corner, “You are here.”
What happens next is anyone’s guess. However, since it’s all guess’ and opinions now seem to be near worthless as compared to central bank largess. I’d like to offer up my own 2-cents.
If I’ve said it once, I’ve said it a thousand times, but for those who may need to hear it again here it is: China.
Does anyone think for a moment that China is going to sit back and say “Oh look, Japan is devaluing and deploying helicopter styled money-making their goods and services cheaper and more affordable. Good for them.”
Want a little more “context?” China was just told “Yeah that whole South Sea thing you say is yours? Sorry… no.” And they are far from saying “Oh well, that’s the way it goes I guess.” In actuality – they are far from happy, rejecting the entire process and outcome stating “China will never accept any claim or action based on those awards,” Chinese President Xi Jinping said.
Think China is going to take into consideration any turmoil a further devaluing of their currency is going to have on the west? You know, as to not want to upset the “apple cart?” Especially after what has transpired Monday and Tuesday? Give that a thought through, and a long one at that.
If China decides tomorrow, or in the very near future to send its own message in just one short blast of Yuan devaluation of any magnitude? The music stops. And you can quote me on that.
Just on a side note – didn’t the band play on during the Titanic disaster? Sorry, just thinking out loud.
© 2016 Mark St.Cyr