More Market Gamesmanship Courtesy Of Wall Street
As we have said numerous times on here, one should never confuse the market with the economy. Liquidity is driving this rally. The Fed has basically given Wall Street carte blanche to do as they will with plenty of free liquidity. Yet people in the economy are starved for liquidity. It's really quite simple to explain why the market is not reflecting fundamentals. Were the Fed not to have backstopped Wall Street, our society would be a world of chaos right now.
But, given the lack of transparency into the Fed, Wall Street and Washington, we really have no idea what all of the sources of liquidity are or how they are being used. Could the Fed or Washington be leading a policy of monetizing action in the stock market? Are more illegal machinations driving prices? Or is this just a reflection of Frankenstein finance in all of its glory with unlimited liquidity? No one can honestly say. But what we do know is that Wall Street's perceived brilliance can be described by three words - Federal Reserve liquidity. Rather than using liquidity to assist American business and citizens, the policies we see allow Wall Street to once again rampantly speculate in financial markets. Our banking system is truly criminal.
I use my own volume advance-decline line because I choose to calculate it differently than that provided by data providers. So, let's look at my volume advance-decline line (in red) along with the S&P 500 in the graphic below.
I have never seen anything like what we experienced the last week in the stock market. A literally melt upwards on massive volume. This action obviously isn't indicative a normal market. I don't know how to interpret this any other way than a concerted effort at manipulation or a simultaneous mania of nearly every participant in markets (highly unlikely). Anyone who rode the market down surely enjoys making back some of their losses. But, at some point this rally will fail. If this was a hammer applied to a growing bearishness and short positions, we might see a vacuum in price develop relatively quickly. If it is indicative of the substantial government-backed liquidity facilities or manipulation, then it will likely end when we see the next economic or Wall Street liquidity shock. If this is some attempt to levitate markets and recreate much of America's lost savings, it would be a potentially noble effort with damning unintended consequences. Markets this large simply cannot be manipulated forever. In other words, financial markets must eventually converge with fundamentals. Then all of the additional debt, economic mistakes and imbalances created in financial markets and the economy while portraying the illusion of returning prosperity will come pounding down around us. Then the mess will simply be that much larger as we highlighted in the last post. This is the last dying breath of monetarism and the associated lunacy taught in our hallowed schools of finance and economics.
When reality once again sets in, those without an ability to trade the markets will once again lose their savings. Wall Street is still using society's own money to trade against us. It's legalized stealing. Someone has to take the other side of that trade. It's going to be the school teacher, the construction worker, the accountant through their 401Ks, pensions and life savings. Allowing this continued behavior on Wall Street guarantees liquidity in the underlying economy will recede even further. Because these trading schemes have the effect of stealing society's money. ie Draining liquidity from the underlying economy.
Thank you Washington politicians for your substantial and serious attempt at reforming our economy and our financial system. For this the economy will thank you with more substantial pain to come.
But, given the lack of transparency into the Fed, Wall Street and Washington, we really have no idea what all of the sources of liquidity are or how they are being used. Could the Fed or Washington be leading a policy of monetizing action in the stock market? Are more illegal machinations driving prices? Or is this just a reflection of Frankenstein finance in all of its glory with unlimited liquidity? No one can honestly say. But what we do know is that Wall Street's perceived brilliance can be described by three words - Federal Reserve liquidity. Rather than using liquidity to assist American business and citizens, the policies we see allow Wall Street to once again rampantly speculate in financial markets. Our banking system is truly criminal.
I use my own volume advance-decline line because I choose to calculate it differently than that provided by data providers. So, let's look at my volume advance-decline line (in red) along with the S&P 500 in the graphic below.
I have never seen anything like what we experienced the last week in the stock market. A literally melt upwards on massive volume. This action obviously isn't indicative a normal market. I don't know how to interpret this any other way than a concerted effort at manipulation or a simultaneous mania of nearly every participant in markets (highly unlikely). Anyone who rode the market down surely enjoys making back some of their losses. But, at some point this rally will fail. If this was a hammer applied to a growing bearishness and short positions, we might see a vacuum in price develop relatively quickly. If it is indicative of the substantial government-backed liquidity facilities or manipulation, then it will likely end when we see the next economic or Wall Street liquidity shock. If this is some attempt to levitate markets and recreate much of America's lost savings, it would be a potentially noble effort with damning unintended consequences. Markets this large simply cannot be manipulated forever. In other words, financial markets must eventually converge with fundamentals. Then all of the additional debt, economic mistakes and imbalances created in financial markets and the economy while portraying the illusion of returning prosperity will come pounding down around us. Then the mess will simply be that much larger as we highlighted in the last post. This is the last dying breath of monetarism and the associated lunacy taught in our hallowed schools of finance and economics.
When reality once again sets in, those without an ability to trade the markets will once again lose their savings. Wall Street is still using society's own money to trade against us. It's legalized stealing. Someone has to take the other side of that trade. It's going to be the school teacher, the construction worker, the accountant through their 401Ks, pensions and life savings. Allowing this continued behavior on Wall Street guarantees liquidity in the underlying economy will recede even further. Because these trading schemes have the effect of stealing society's money. ie Draining liquidity from the underlying economy.
Thank you Washington politicians for your substantial and serious attempt at reforming our economy and our financial system. For this the economy will thank you with more substantial pain to come.
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