There’s a moment in life that is one of the most profound, as well as frightening moments one may have. So life altering is this moment that history is littered with it. Oral tales have been passed on for millennia expressing these times. Books have been written, along with plays, movies, and on and on.
Then, of course, there’s the ones that never make it out of one’s own consciousness. Where its kept private, hidden. Where the only thing left to do is ask oneself what they will do about this revelation, such as:
- A) Do nothing but languish in the remorse hoping, wishing, or praying that it’ll all work out, some how?
- Or, B) Try to understand why, make the necessary changes with immediacy, and try one’s best to move forward?
It all sounds so straight forward in that simple “A-B” construct. i.e., Do nothing, or do something. Again, sounds so simple, if only that were the case, because what that A-B construct for action vs inaction represents only sounds innocuous, or so easy, until the true question for which it answers is revealed.
That question is…
“What do you do when you realize everything you thought you knew was a lie?”
This question is so profound for one simple fact: Not only can it change an individual, but it can/has changed religions and empires.
Today, this question is once again pushing its way forward onto the global stage. Yet, it’s the where this question is currently manifesting that will have the greatest impact on so many and in ways that are too numerous to contemplate, for the final result will be written on the next blank page of history. But make no mistake – written it shall be.
It has to, because the page preceding it, demands it. What is this preceding page? Great question, and it is this…
“How did the greatest monetary experiment, in the history of monetary policy, resolve itself in the end?”
We are currently in this “blank page” moment of history. And it is here where the afore-mentioned question becomes so profound, as well as prominent or influential. The reasoning is simple:
“If the only reason for the “markets” current valuation was predicated via central bank largesse, what happens next?”
Hint: If as Rod Stewart once crooned, “Every picture tells a story. don’t it?” Then this one is writing the opening chapter, for this time in history. To wit:
Now there are a lot of annotations on the above chart, which is of the S&P 500™, using weekly bar/candles since the beginning of what we now refer to as “The great Financial Crisis,” until now.
However, what should grab your attention are the colored rectangles, for it is here where one can see every-time the “market” became unstable, or “rolled over” as some prefer. It didn’t resolve in a positive way (i.e., reward the BTFD (buy the f’n dippers) until some action was implored by the Fed. via one channel or another. i.e., Whether it was illusory, or implicit insinuations of further Fed. actions.
If one looks carefully there’s one commonality that should grab your attention, and it is this: Their proportionate size from top to bottom are so similar it demands further attention.
The idea being, that when similar patterns arose in the “markets” only one thing brought them under control: Either direct intervention, or the jawboning that it was forthcoming with near immediacy if needed.
And that is where the answer to the beginning question in this article (e.g., What if everything…) takes front and center positioning.
For if the only reason that the “market” is at these dizzying heights is proved to be just that. i.e. Without continual central bank largess, and in-particular Federal Reserve monetary interventionism there is no market. Everything one has taken at face value as learned, or implied knowledge of markets and their implications, for and on business, at all levels, would/will be nullified.
The only thing worse is just how adamant one believed in today’s quasi, specious fundamentals, professed and parading as being actual or true. For that will be indicative to the signal of just how painful the unlearning process will be. If – one wants to truly face it head on.
When I first began writing about the markets it was out of frustration, because at the time I had just retired at 45, moved (1500+miles) into an area where I knew no one, and thought I was embarking on living the back half of, “The Dream.” Little did I know I would be faced with some of the most perplexing, scariest, as well as awakening moments of my life. Luckily for me I was engaged in handling all my own monetary affairs. i.e., I was my own wealth advisor and stock broker, not some 26-year-old at some branch office.
It was during that period of time (i.e., during the market panic of 2008) I fully understood that most, if not all, of those paraded across the business/financial media, in all forms – hadn’t a single solitary clue about what was going on, nor what to do. And they were the supposed “experts.” That view has not only remained, but rather, has been fortified as I’ve discerned or dissected many a so-called “smart-crowd” prognostication over the years.
During that period I took any-and-all of my previous business acumen – then concentrated and applied it – into the sole purpose of honing my bullsh#t meter into one that was second to none. Then, I immersed myself into financial markets and more, questioning, and questioning again as to truly understand what is/was/or should be happening in relation to circumstances.
This many times lead me to being wrong in my assessments of what was possibly forthcoming, and how soon, for at every interval where the fundamental process of market clearing, or true price discovery arose – the Fed. suddenly intervened, in ways that only a few years prior were taught at Ivy League universities as “sheer crazy-talk.” Yet, that was exactly what transpired. So crazy has this all been turned upside-down, that what was once considered “crazy-talk” is now taught as, “prudent monetary policy.”
The now no-brainer BTFD was proved “brilliant” at every market tremor. And over the years – when tremors turned into upheavals? Backing up the truck, dump-truck, excavator, railroad cars, and anything else that could hold a ticker symbol and over-filling it was, and has been, the “genius” trade of the last decade.
This behavior has all been rewarded via the incessant cackling of “great earnings, low unemployment, blah, blah, blah,” by the so-called “smart crowd” across the business/financial media. Ph.D economists, next-in-rotation fund managers, V.C.’s, you name it, they’ve been out across the media for nearly a decade now professing everything that’s been happening is a result of this, that, or the other thing.
But there’s a problem, it’s been only for one thing – and that “thing” is the Fed. and its central bank brethren. Period. Full stop.
If the Fed. is indeed going to SOH (sit on hands) when it comes to rescuing the “market” as it has done so many times prior, along with shrinking its balance sheet and raising rates. The most obvious question to contemplate is this:
How long does that box residing at the current pinnacle of these “markets” grow longer before the Fed. steps back in, proving it was all them to begin with, to any remaining skeptic?
And if so, what further “market” turmoil happens? Does it go up, again? Or, does it fall further, because of lost credibility?
BTFD may just be the absolute worst learned market reaction ever promulgated.
Is there a flip side to all of this? e.g, “Being wrong for the right reasons?” Hint: You bet there is. And it is this…
Those of us that kept the “Coolade” at bay all these years are looking at the probability for calamity that may unfold, not with fear, or apprehension. But as one of the biggest opportunities in business, worthy of its own chapter in the history books. And we’re fully prepared to take full advantage of it. Because as everyone else resided in delusional thinking these now 9+ years – we (as in those who’ve argued against the delusion created by central banks) remained glued to the idea that fundamentals such as 1+1=2 math, or net profits and such, at some time, will reassert themselves as the only metrics that truly matter.
An “un-learning” curve is probably the most painful process to mentally go through. The only thing worse is when it’s realized just how vehemently one never believed it possible. I believe we are on the brink of the “possible” becoming probable. And that changes everything:
© 2018 Mark St.Cyr