I received the most interesting note from a colleague last night in relation to the current civil unrest and the “markets.” I’m going to paraphrase and condense what was said. To wit:
I know you’ve been calling these markets “markets” (meaning in name only) for quite some time, and I understood where you were coming from. But I really didn’t buy into it, because I could rationalize reasons for why it was doing what it was doing. i.e., Forward looking P/E ratios, sales and more. Then came the Corona-virus and all it brought forth, and down we went. But again, I thought it was overdone and the bounce back was more than justified.
But now with the civil unrest, rioting, looting, burning of businesses and storefronts, limits on business for occupancy, code restrictions and more, I started having a hard time explaining to myself why and how the markets still go up every single day! Now we are possibly going under some form of martial law with military patrolling the street and the markets still don’t even blink.
Now as I look at these markets in the light of today’s rage I am starting to become terrified. Every day these markets go up I feel they are like a signal fire to protest even more, fueling the “The rich keep getting richer, even as the world burns!” Nothing makes sense any more. It’s all just nuts!
He’s absolutely correct that when looking at these “markets” one can no longer truly give a proper reason for their elevation, and many professionals themselves have stopped trying. (Although that hasn’t stopped the mainstream business/financial media, but I digress.)
What you now have on vivid display is a very real juxtaposition for true analysis. In other words: If you still believe these markets are anything other than a Central Bank money printing casino creation, that has nothing to do with economic underpinnings or fundamental financial underpinnings – then you’re as delusional as many of these news programs calling much of this anarchy and looting “protests.”
The “markets” are displaying what is now to be taken as complete chaos in regards to fundamental business principles. And at some point it too will burn itself down.
It can not go on this way indefinitely. Something will break. It’s just a matter of when, not if. And the most concerning issue you need to take note of is this:
Just as the current civil unrest is boiling over. No one wanted to address it until there was a utter tragedy that was undeniable; couldn’t be explained away; couldn’t be defended; was self-evident to any sane person. Then, the inevitable result of that built up pressure cooker breaks loose with disastrous consequences. Because now everyone “sees.”
The markets continuing to rise against this current backdrop is doing much the same. Remember: you now “see.”
What happens when everyone else does too?
© 2020 Mark St.Cyr