The world is now fully embroiled in a most precarious period. I wonder if the Fed is comfortable seeing the markets dash skyward – the small caps up 16.4% y-t-d, Banks 15.9%, Transports 15.2%, Biotechs 18.5% and the Semiconductors 17.0%…. Read More ›
… deflation is a fateful consequence of bursting Bubbles – Bubbles inflated in the process of central bankers fighting so-called “deflationary forces.” Now, after thirty years of unending global Credit growth, activist central banking and egregious financial speculation, Bubble risk has never been so great: “The amazing lurch toward recession” and financial dislocation specifically because of a failed experiment in QE and inflationist monetary management.
Yet with global markets in a synchronized rally, one easily assumes the Fed and central banks have again worked their magic. Stability has engulfed the world. Nothing could be more detached from reality.
Serious illiquidity issues were unfolding a small number of trading sessions ago, as equities and fixed-income outflows – along with derivatives-related and speculative selling – began to overwhelm the marketplace. Fed assurances reversed trading dynamics. De-risking/deleveraging has, for now, given way to “risk on.” A powerful confluence of short covering and risk embracement (and leveraging) has acutely speculative markets once again perceiving liquidity abundance and unwavering central bank support.
Crisis Dynamics tend to be a process. There’s the manic phase followed by some type of shock. There’s at least a partial recovery and a return of optimism – bolstered by dovish central bankers. It’s the second major leg down when things turn more serious – for sentiment, for market dynamics and illiquidity. Disappointment turns to disenchantment and, eventually, revulsion. It’s been a long time since market participants were tested by a prolonged, grinding bear market.
Excerpt: I appreciate the Fed’s attention to financial stability, stating explicitly the central role it plays within its broader mandate. Powell’s speech offered a definition of “financial stability:” “A stable financial system is one that continues to function effectively even… Read More ›
What ever happened to “Six Sigma”? GE was one of the most beloved and hyped S&P500 stocks during the late-nineties Bubble Era. With “visionary” Jack Welch at the helm, GE was being transformed into a New Age industrial powerhouse –… Read More ›