Monday , 11 December 2017


End of “Wall Street Party” Will Be a Catastrophe! Here’s Why

It is risky to be in markets, but also risky to be out of them. The issue is whether it is less risky to remain on the long-side forstockcrash-2 a while than it is to leave or  go short (something that few can or should try to do) these overvalued markets. 

So says Monty Pelerin (economicnoise.com) in edited excerpts from his original post* entitled Recognizing The Dangers.

[The following is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]

Pelerin goes on to say in further edited excerpts:

Readers know my concerns about the dangers of financial markets. By most reasonable measures markets appear to be greatly overvalued. That doesn’t mean there is still not a lot of upside left though.

Anthony Wile (thedailybell.com) expresses his sentiments on this issue in an article** entitled The Bearish – Bullish Conundrum. His thoughts, regarding both options, are similar to mine. He begins below with an observation I could not agree with more:

“…the markets are considerably, fantastically over bought and that whatever happens after this “Wall Street Party” is going to be a sort of catastrophe. One could also argue, however, that it is foolishness to bet decisively against the top banking elites evidently organizing this latest, last blowout. We’ve analyzed what’s been set in place and it doesn’t seem to us that those behind this ploy are ready to declare it over, certainly not yet. The groundwork has been laid, but there is much yet to reap:

  • Janet Yellen, the Fed’s uber-dove, has not yet taken office. England’s uber-dove Mark Carney has only just begun his term at the top. Together these formidable easy-money mavens could print tidal waves of money to lubricate Anglosphere equity markets. This is part of a larger coordination of easy money policies affecting Asia, as well.
  • The JOBS act allows private firms to advertise opportunities to a global audience, even though purchasers have to be accredited investors. The massive PR effect of the JOBS Act has barely been felt.
  • The IPO pipeline is still jammed with warmist and “green” corporate product still waiting to be funded.
  • Gold has been hammered down by the same elite banking forces that are forcing markets higher. The pressures on gold via dollar appreciation show no signs of easing any time soon.
  • Fracking continues unabated, providing a further “feel good” story about energy resources and the prospect of stable energy prices going forward.

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What could slow the “party” or end it would be significantly higher interest rates; but central banks, coordinated by the Bank for International Settlements, have proven to be effective thus far at controlling dollar-reserve rates despite the torrents of dollars that have been printed over the past half-decade.

Also, it is not as if central banks have stinted on the money printing. While the Fed itself has admitted to something like US$16 trillion distributed post-crisis, mostly in short-term loans (probably not paid back), the actual total is a good deal higher. Close to five years ago, we estimated that central banks would probably print about US$100 trillion to try to prop up the failing system. We figure the total thus far is somewhere around US$50 trillion, though it could be higher. Despite these unimaginable sums, price inflation has certainly not reached hyper levels though, to be sure, the amount of price inflation is considerably understated.

There is no overriding certainty that central banks will lose control of their monetary base in the next month or even in the next year and, if they begin to, there are always stopgap measures such as the US “plunge protection team” which can brazenly – and illegally – go into the market with freshly printed central bank money to stabilize it, as necessary, at least in the short-term.

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At some point there will be a breakdown. Real market forces will reassert themselves but “when” is not easy to discern. I personally know people who are continually trying to sell this market short and are surrendering over and over because the timing is not right.

The IPO market is revving up; top central banking doves are in place; the JOBS Act is ready to pour its promotions on receptive investors around the world; central banks are coordinating money printing in ways never seen before; gold remains down.

It is sensible to predict the demise of this empyrean equity fairy tale but those elite bankers controlling the central banking money printing have different ideas. To sell THEM short is not a good idea, as they have proven to be both brutal and determined over generations and continue to have formidable weaponry that allows them to pursue their goals.

One can make the bearish case with ease in this illogical market but logic may have little to do with it currently and no one can say with any precision when a final crash may come. For now, the punch bowl sits squarely in the center of the table. There may be a good deal of volatility associated with this “party” but I don’t see any sign that someone intends to confiscate the booze as of yet.”

 [Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]

*http://www.economicnoise.com/2014/01/05/recognizing-dangers/ **Source of quote above: http://www.thedailybell.com/editorials/34895/Anthony-Wile-The-BearishBullish-Conundrum/#sthash.niZ1nfLd.dpuf

Related Articles: (Please note: The articles posted on munKNEE.com deliberately present a diverse perspective on subjects discussed. Below are links, with introductory paragraphs, to a variety of related articles designed to help you become truly informed regarding both sides of the issues so that you can assess the merits of all points of view and come to your own conclusion.)

1. This Chart of the Dow Suggests “Bring on 2014 – We Ain’t Seen Nothin’ Yet!”

The Fed has manufactured a parabolic move in the stock market…which is much more aggressive (and thus even more unsustainable) than witnessed at either the 2000 or 2007 stock market tops. Parabolas always collapse – there are never any exceptions – so when the pin finds this bubble it’s going to take down not only our stock market, but unleash a destructive force on the global economy. Read More »

4. Warren Buffett’s Favorite Valuation Metric Suggests Stock Market Is OVERvalued by 15%

The Dow Jones Industrial Average is a fabricated number that has little relation to the actual average performance of the stock market as a whole. For sure, it is not industrial in nature, and by no means is it an average. It’s like creating an all-star team of the very best-performing companies and broadcasting to the world that this is the average of all companies out there. Read More »

7. These Indicators Suggest Stock Market Returns Are “Too Good To Be True”

Current macro conditions indicate that we are in a sweet spot for equity returns…that global growth is continuing and there is little or no tail risk in the immediate future. It’s time to get long equities…but I have this nagging feeling that these market conditions are too good to be true. If you look, there are a number of technical and fundamental clouds on the horizon. Read More »

8. Don’t Be Scared “Stockless”! There’s No Fear Anymore – Anywhere!

Bubble predictions are headline-grabbing claims that are sure to attract reader/viewership and more than a few worried individuals who will be pushed to act but, like all forecasts, these bubble warnings should be taken with a grain of salt. Read More »

 

2 comments

  1. http://wp.me/p41Z8k-fhh
    From 08-08-13

    If the financial market takes a DIVE (pun intended) then watch Precious Metals go ballistic, as they said in TopGun. http://www.subzin.com/quotes/Top+Gun/He's+going+vertical.+So+am+l.+-+We're+going+ballistic.+Go+get+him

    Investors are all being played by the Central Bankers and their friends in their Big Banks; few if any others will be able to join in the mega profits to be made when the “switch” occurs, because the markets will all be closed to normal trading until the dust settles, at which time the financial times as we have known it will be over as a new day of fiscal reckoning arrives.

    Can anybody imagine what a devaluated US$ would be worth, (I’m thinking a hundredth of a new buck (NU$)? It would be hard on US but much harder on all those that we owe money too, as we just paid them off in our New Bucks (NU$) which might even be in the form of electronic money called e$, which would allow for instant deployment while also making life difficult for all those will huge amounts of paper money that they cannot explain to the conversion auditors that will handling all monetary conversions between old US$ and NU$…

    Further, if some countries choose to not do business with US, well so be it since we are the Worlds biggest consumers and have the strongest Military to protect them. It might even create huge numbers of jobs since many would be wanting to buy american since that would save them from losing money if they bought foreign goods because of the conversion from N$ or the e$ to another currency.

  2. Wall Street will stay a financial center for a long time but its position as a Global fiscal leader will continue to erode as the US$ continues its decline as THE currency used for global trade, it is jst a matter of time…

    From last fall: 10-15-13

    The Fed (and the Central Banks globally) are now juggling too many balls while at the same time they are not paying attention to what is happening to the middle class, (which is shrinking in size thanks to the monetary policies of the Big Banks). As the middle class shrinks, the very foundation of our economy is trembling which is going to result in the Fed dropping balls. Once the first one drops, others will follow and then things will get ugly fast, as electronic trading will enable a cascade (dare I say crash) in falling stock prices, since the biggest traders will be the first to jump ship by selling short leaving all the little people to sink or swim for themselves!

    This is why I see the value of PM’s not only returning to previous highs but rocketing upward to new record levels as stock investors rush toward the financial stabilization that PM’s provide over the long term.

    Said another way, China is warning the USA that our Congress is starting to destabilize the international marketplace and even China cannot allow that to happen!