Bear Market

Beware The Bubble In China's Domestic Commodity Market

Does it smell the same as 2015’s A share market? But wait, the leverage in the commodities market (easily 10x) is much higher than that in the A share market (normally 2-4x). If the investors still remember the lesson in 2015, they should pay extra attention now. When the music stops, the collapse of price can be faster and steeper than the pace of going up. 2009 already showed us a real example in the Rebar market.

Weekend Reading: It's Probably A Trap

The “bullish case” is currently built primarily on “hope.” Hope the economy will improve in the second half of the year; Hope that earnings will improve in the second half of the year; Hope that oil prices will trade higher even as supply remains elevated; Hope the Fed will not raise interest rates this year; Hope that global Central Banks will “keep on keepin’ on.”  Hope that the US Dollar doesn’t rise; Hope that interest rates remain low; Hope that high-yield credit markets remain stable.

Cycles, Bounces, & The Only Question That Matters

Unfortunately, when central-planners "drag forward" future consumption today, you leave a "void" in the future that must be filled. That future "void" continues to expand each time activity is dragged forward until, inevitably, it can not be filled. This is currently being witnessed in the overall data trends as seen in the deterioration in corporate earnings and revenues. The only question is whether Central Banks can continue to support asset prices long enough for the economic cycle to catch up. Historically, such is a feat that has never been accomplished.

Why Is The Stock Market So Strong?

Although money supply growth remains historically strong and investors are desperately chasing returns in today’s ZIRP world and are therefore evidently prepared to take much greater risks than they otherwise would, an extremely overvalued market is always highly vulnerable to a change in perceptions. In a sense the rebound may actually turn out to be self-defeating, as it will increase the Fed’s willingness resume tightening policy.

UBS Warns "Beware The Bull Trap" As Breadth Breaks Down

"Together with a divergence forming in the VIX index, and with the seasonality getting toppish we continue to see the risk of a significant and longer lasting tactical correction leg in the US and global equities into summer."

Standing At The Crossroads

The market is standing at the proverbial “crossroads” of bull and bear. From a “fundamental” perspective there is not much good news. The past week we saw numerous companies beating extremely beaten down estimates. However, while JPM and C got a boost to their stock price, the actual earnings, revenue and profits trends were clearly negative. But that is the new normal. We live in an environment where Central Banking has taken control of financial markets by leaving investors “no option” for a return on cash. Therefore, the “hope” remains that asset prices can remain detached from underlying fundamentals long enough for them to catch up.

The Tragedy Of America's Bull Market Culture

The middle class in America forgot all about the importance of savings and frugality and instead bought into the lie that one’s future would be “taken care of” if only it threw its money into the stock market.

Weekend Reading: Sagacious Discombobulation

So what do you do? Play the short-term chase the market game or the longer-term wealth devastation game. The choice is yours to make, the consequences will be for all to share. “I will tell you my secret: I never buy at the bottom and I always sell too soon.” – Baron Nathan Rothschild

"The World's Most Bearish Hedge Fund" Has A Terrible March, Goes Even Shorter

"How do you know this is just a short squeeze, and not the beginning of something much more substantial? While equities are trying to send a bullish tune, the 200 day moving average is now trending down for S&P, Dax and the Nikkei. This is not bullish. Furthermore, yield curves in the US, Japan and Europe have flattened. This is not bullish. Yen is rallying. This is not bullish. We have seen substantial covering by the market. This is not bullish."

"Someone Is Going To Be Very Wrong"

What is clear is that the Federal Reserve has gained control of asset markets by gaining control over investor behavior. “Are you afraid of a market crash? Yes. Are you doing anything about it? No.” Again, it’s back to fundamentals versus expectations. Someone is going to be very wrong.