"Why This Stock Market Will Never Go Down"

Tyler Durden's picture

Update: turns out it was satire. Supposedly:


While the last thing we would like to do is bring even more attention to today's grand slam in financial trollery, the following article by the ironically-named MarketWatch author Michael Sincere is just too funny to pass by.

Presenting: "Why this stock market will never go down" which contains such stunning pearls of financial insight as the following:

Everyone believes the U.S. stock market has reached a permanently high plateau. Everyone, that is, but the bears.

 

Last week’s Investors Intelligence survey showed bearish sentiment at its lowest since 1987 (13.3%). In fact, short-sellers have nearly disappeared along with the few remaining bears. In addition, the VIX is at historic lows (near 12), which reflects investor complacency.

 

Put another way, almost no one believes this market will go down.

Wait, "permanently high plateau"? When was the last time we heard that line. Oh wait, nevermind.

That said, the author does point out the clear inherent falacy in his premise, namely that there no longer is any retail participation in a market which everyone realizes is too rigged, too manipulated and too broken to hope to even break even:

Ironically, retail investors are not as gung-ho about the market as in the past. Viewership of financial television programs is at 20-year lows, especially in the coveted 25-to-54 age group. It’s a sign that even as the market climbs higher, interest in the stock market is falling along with volatility.

So who benefits: why Wall Street of course - the same source which eagerly passes one hot potato to itself after another, in the process CYNKing the S&P to higher records on ever declining volume.

On the other hand, the overwhelming view of Wall Street can be summarized by two Morgan Stanley analysts, who predicted that the S&P 500 SPX, -0.40%  will be at 3,000 in five years, a 50% increase. If they’re right, the Dow will hit 25,000 lickety-split. Dow 25,000 has a nice ring to it, and to Morgan Stanley and others on Wall Street, an additional 50% gain is actually a conservative estimate. This is a market that is unstoppable. If only they can convince Ma and Pa, the market would go even higher.

Then the author for some inexplicable reason decides to troll "bears" by "exposing" two "conspiracy theories." Actually, in retrospect the click-bait reason is quite explicable.

While the bulls are laughing, the bears are sulking. No one believes their Chicken Little doom-and-gloom warnings. A 10% correction? Wrong! A 20% crash? Wrong! Last month, after the Dow fell more than 600 points, the bears thought they had a chance, but they were mistaken. If you believed the bad news bears, you would have missed out on a 200% gain since 2009.

 

The market has shrugged off multiple geopolitical problems, low market volume, trillions of dollars of debt, sky-high sentiment, extreme P/E ratios for many high-flying stocks, and dozens of other red flags. Yawn. The only gorilla in the room that matters is the Fed.

 

And because bears are sore losers, they have come up with wild conspiracy theories to explain why they have been so wrong:

 

Conspiracy theory #1 — Plunge protection: Market observers have noticed a pattern that has been repeated for months. As soon as the market begins to sell off (usually in the morning), a massive computer algorithm enters with buy orders, preventing the market from falling. On the chart, it makes a “V” pattern. Conspiracy theorists believe the Fed is doing the buying, but they have no proof. We know that the Fed buys bonds, but buying stocks would go way beyond their mandate. Conspiracy theorists believe the Fed is terrified of letting the market fall because it could turn into a massive crash.

 

Conspiracy theory #2 — Ignore inflation: The bears believe this is a faux bull market that has turned into the biggest bubble in stock market history. They believe the Fed and other central banks around the world will keep interest rates low indefinitely by ignoring inflation. I have bad news for the bears: You’re right: The Fed will do everything in its power to keep interest rates low. As soon as the Fed seems serious about raising interest rates (that’ll be the day), the stock market might hiccup. But why would the Fed raise interest rates and crash the party?

Why indeed... Oh, maybe because as we showed yesterday excess liquidity in the market has never been higher and the central banks, the Fed included, know that once the Kool-Aid spice ends, nobody knows just how far the market will crash. So instead they do the only thing they can - push it to ever bubblier levels.

It is not until the end that one senses of hint of sarcasm:

If you study history, you know that no one thought the price of tulips, houses, or stocks would ever go down. Even most bulls believe that “one day” there will be a correction, but that day is far away. After all, the Fed has an unlimited supply of magical tools, and they are determined to keep the market from falling.

But said "sarcasm" promptly evaporates when one reads the final sentence, and realizes that the author was serious all along.

Unfortunately for soul-searching bears, the Fed trumps all. As long as new money flows into stocks, interest rates are low, and the market keeps going up, why worry?

As we said: pure trolling comedy. As to why worry... well "long-term" trader memories may be 6 years or less, but the last time everyone put their faith in the Fed, the market plunged some 60%.

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Chuck Knoblauch's picture

Rigged to go up until it's rigged to go down.

CHX's picture

Rigged up, until the jig is up and the rig topples over.

venturen's picture

Remember the Zimbabwe market never went down, Venezuela never went down, USA never went down....  Price of Beef now over $5/lb...looking forward to your $50 Yellen Burger?

numapepi's picture

According to the brianiac 3000's, meat could go to $100.00 a pound, clothing could become unaffordable and a monthly electric bill could skyrocket to $10,000.00 a month, but if I phones and house prices go down... there is no inflation.

I Write Code's picture

It will not go down because it correctly reflects inflation, and the whole economy would have to deflate to make the market go down, and raising interest rates is not a deflationary move, according to the textbooks.

Of course the textbooks don't work anymore, and I suppose raising interest rates for no fundamental reason could flatten an economy and cause deflation, including stocks.  The problem is the Fed has already (since 2008) broken reality by lowering interest rates for "no reason", so simply stopping this interference could indeed look like deflation.

Wot a fooking mess.

buzzsaw99's picture

there is no market

Yen Cross's picture

    The Fed. and other central banks don't buy stocks, just like Belgium and Euroclear aren't backdoor UST buying proxies.

Banker Buster's picture

It's like the Fed is Nick Leeson in the movie Rogue Trader where the other trader in the pit asks Nick, "your not the big buyer holding this market up are you???"  We found out how it looks when artificial support breaks.  

 

Don't fight the Market Mate

 

polo007's picture

According to the Federal Reserve Bank of San Francisco:

http://www.frbsf.org/economic-research/publications/economic-letter/2014/september/assessing-expectations-monetary-policy/

Assessing Expectations of Monetary Policy
 
An ongoing concern has been that the public might misconstrue the Fed’s forward guidance about future monetary policy and underappreciate the extent to which short-term interest rates may vary with future news about the economy. Evidence based on surveys, market expectations, and model estimates show that the public seems to expect a more accommodative policy than Federal Open Market Committee participants. The public also may be less uncertain about these forecasts than policymakers.

Recently, subdued levels of volatility in financial markets have received some attention. For example, Federal Reserve Chair Janet Yellen (2014) noted that “indicators of expected volatility in some asset markets have fallen to low levels, suggesting that some investors may underappreciate the potential for losses and volatility going forward.” Prices of financial assets, such as stocks and bonds, are sensitive to unexpected changes in interest rates because their present values are determined by discounting future cash flows. Thus, the low volatility in asset markets could, in part, reflect market participants’ relative certainty about the future course of interest rates.

In this Letter, we assess the private sector’s views about future monetary policy in terms of both expected levels of the short-term interest rate and the uncertainty or disagreement in those expectations. Through its “forward guidance,” the Federal Reserve’s policymaking body, the Federal Open Market Committee (FOMC), provides an indication to the public about the stance of monetary policy expected to prevail in the future. Furthermore, since 2012, the FOMC participants’ projections of the appropriate target for the federal funds rate over the next several years and in the longer run have been included as part of their quarterly economic projections, which are released to the public. Research has shown that this communication of interest rate projections can better align the public’s and the central bank’s expectations, which could lead to improved macroeconomic performance (see, for example, Rudebusch and Williams 2008). However, an important concern is that the public might not give enough weight to how dependent the central bank’s guidance is on both current and incoming data. Thus, the public could underestimate the conditionality and uncertainty of interest rate projections.

We assess the public’s expectations about future monetary policy from three sources: (1) surveys of economic forecasters and primary dealers, (2) market prices of federal funds and Eurodollar futures, and (3) estimates from a financial-econometric model. We then compare these public expectations with the expectations reported in the June FOMC participants’ federal funds rate projections (Board of Governors 2014). Our analysis shows that, on balance, the public seems to expect more accommodative policy than FOMC participants. One measure of uncertainty also shows the range of the public’s forecasts is somewhat smaller than that among FOMC participants, suggesting the public also may be less uncertain about their projections.

Surveys of economic forecasters and primary dealers

We look at two surveys of private-sector professionals about their monetary policy outlook. One is the monthly Blue Chip Financial Forecast, based on a survey of about 50 professional economic forecasters on key financial variables, including the federal funds rate, up to five quarters in the future. For our analysis, we use the August 2014 Blue Chip forecast based on polling from July 23–24. The other is the Survey of Primary Dealers regularly collected by the Federal Reserve Bank of New York before each scheduled FOMC meeting. In the most recent survey dated July 21, 2014, 22 primary dealers—brokers or financial institutions that are able to purchase Treasury securities directly from the Fed—submitted forecasts of the target federal funds rate for the fourth quarter of 2014 through the first half of 2018, as well as their expected long-run value.

Figure 1 shows the expectations for the future federal funds rate from the two surveys, and the June FOMC participants’ funds rate projections, collected in the Summary of Economic Projections (SEP). The Blue Chip median forecast of the federal funds rate at a quarterly average of 0.80% in the fourth quarter of 2015 appears to be consistent with the median SEP projection of 1% at the end of 2015. The primary dealers’ median forecast of the most likely date for the first funds rate hike was the third quarter of 2015. Note that their median forecast for the end of 2015 and the end of 2016 were 0.75% and 2.13%, respectively. These median forecasts are lower than the median SEP projection of 1% at the end of 2015 and 2.5% at the end of 2016.

In addition to the median forecasts, Figure 1 also shows the 25th and 75th percentile forecasts from primary dealers and FOMC participants. For a certain date in the forecast, the 25th percentile is the point at which one-quarter of the respondents believe the fed funds rate will be lower, and the 75th percentile is the point at which one-quarter of the respondents believe it will be higher. The distance between the 25th and 75th percentiles measures the forecast dispersion, an indicator of uncertainty or disagreement among the forecasters. In the July survey, the dispersion of the primary dealers’ forecast was smaller than that of the SEP projection. This suggests that FOMC participants were more uncertain about the future course of monetary policy than primary dealers were.

Dadburnitpa's picture

Michael Sincere?

That is dude's real name?

His prose, process and photo indicate that he's about 15 years old.

Funny shit, that.

VWAndy's picture

Keep laughing. Main street is starting to stall. Ask any small buis owner.

 Meanwhile these clowns are talking bail ins and wealth taxes. With government going feral at all levels. The social contract is busted.

 Look around see that light? Yep its reality and its coming fast. So dance mfr dance!

 Me I own the mother tools and know how to use them. My time is coming. Fools.

 

aquarian1's picture

I think the Marketwatch article is worse than just funny. There is a concerted effort on MSM to draw in the last of the retails fooks to this bubble.

PPT is not a threory

additionally there was an act that allows the US govt to directly buy stocks in the market whenever they wnat to - such as after Yellen got in

If you combine the manipultion of the market (see CME pinky swears not to be bad -again here at ZH) together with man arrested for posting song lyrics on facebook (ZH) and homeland sec buying 300 million rounds to use on americans and Portugal bank collapse and Spain's twice and Cyprus and Iceland, and Irish Bank and Scottish Bank PLC and 4 trillion of bad debt bond buying by Fed giving banks money to play in the markets, and the 29trillion of central banks spec in the stock markets (ZH) and all the manufacturing exported to the totalitarian state of China via 1990 preferred trading status you see peices of a very ugly picture.

most disturbing in the lack of people being able to think. The mind control of the masses by MSM is almost totally and the masses believe thinking is reading the paper in the moring and watching the TV news throughout the day. Twits twittering each other.

We are not approaching Orwellian society we are deep in it and the control is all the more powerful that people can't/choose not to see it.

(This is more than 30 characters so I guess it won't be read.)

 

AdvancingTime's picture

To say the market is rigged is an understatement. After over 30 years of trading commodities I will flat out state without any reservations that lies and manipulation run rampant. If you think anyone is looking out for the small independent trader you are wrong. An unholy alliance of the Federal Reserve, the government, and the too big to fail has left the rest of us in a precarious position.

For the big boys, its insider information and computer trading, this includes computing patterns that exploit where stops are placed, this improves their ability to wash the weak out of their positions. The bottom-line is that the higher the market goes the more vulnerable it becomes to a major collapse and sudden downward move. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/07/markets-more-lies-and-munipulatio...

Shizzmoney's picture

It actually wont go down; its fake (like the Nikkei) and run by robots.

Los Angeles and San Francisco could have an earthquake tomorrow that puts both cities into the Pacific Ocean and the algos would still buy on the bad news.

general ripper's picture

It will never go down because it can't go down. It will be propped up and jerry rigged because it can. If it comes down, bank investment and the derivitive cesspool explode. Normal market forces, price discovery etc. are meaningless today. All that matters is keeping US Fed, ECB, IMF, BIS and all the other Disney characters loaded with freshly minted fiat so they can prop up totally corrupt and bought off governments in the west and take an occasional stab at winning over Eastern Europe puppet governments (think Ukrane). Eventually there could be a systemic breakdown but so long as the current Rothchild express can keep this train on the tracks it will. If it derails you better have a plan B in place. Mine is physical and paper hard USD kept in my control. That's all a man can do.

The Rothchild dynasty only exists because of greed, corruption and ideology run amok. I used to despise the whole lot but have to give them credit, they have a hell of a business model!

sof_hannibal's picture

The article is clearly a farse. Author even admits to some element of sarcasm in their comments section. HOWEVER-- what the true intent of such a piece on Market Watch of all things is absolutely, highly questionable.

Is the author a Tyler mocking Market Watch or a 15 year old posting from his econ class or is it some actual bait and switch/ click bait because Market Watch . Com is just pathetically desparate.

Who knows. END GAM3...

Tjeff1's picture

Zimbobwe's market did not go down.  If only our stocks did this, CNBC would love it.... we would all be rich like Zimbobwe.

TVP's picture

"Grand slam in financial trollery"...

LOL Tyler deserves an award for this shit, seriously. 

Againstthelie's picture

Maybe this article is a very good one. Maybe one day it will be recognized as the seismograph, that nobody was able to interpret: if the market goes up by central bank intervention and the trust in their ability to "solve" problems, then the answer when it will go down, was obvious but nobody wanted to see it: if it goes up because of trust into CBs, then it can go down, when the trust in their abilities will erode.

 

Oh, btw, hyperinflation is NOT a monetary phenomenon - high inflation is a monetary phenomenon - but hyperinflation is a psychological phenomenon.

And when does it set in? When trust vanishes...

 

So maybe the perceived "strenght" of the market, moving forward like an unstoppable tank, maybe is a sign of weakness.

CHX's picture

Forward, Zimbamerica!

 

(repost)

AdvancingTime's picture

I love the way it is always being kicked out a year or two and never going to happen tomorrow. It is as if we can't handle what is coming at us and need more time.

For a long time I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. Below is an article looking at how it could happen sooner rather than later.

http://brucewilds.blogspot.com/2013/01/flash-crash-on-steroids.html

Notsobadwlad's picture

The only obvious thing is that the market is completely controlled. It goes up on command and if it ever goes down then it will be by decree as well.

It is not a market after all... just a scam.

MontgomeryScott's picture

Every single (EVERY SINGLE!) Bank Of America branch within at least 50 miles of my location has closed. I had a guy from Californicateh stop by asking where one was, and one of my co-workers did a search on his 'smart-phone' (I don't do that thingie). Poor guy can't get any money from his 'bank'.

Now, bear in mind, I don't live in a major metro area; BUT, the population within a 50-mile radius exceeds 650,000 people.

This pontificating prole thinks that the FED TRUMPS ALL. What happens when (not IF, but WHEN) the USD is suddenly fucking WORTHLESS because OPEC quits using it? Fucking B of A (they suck, and always have) has closed all their branches around here; I suppose because the KING USFEDRESDOLLAR is really doing WELL.

FUCK the stock market. I've been using the 'averages' as an indicator of hyperinflation. Let's see: DJIA 'G.M.' is closing up shop, murdering Detroit and outlying areas, losing money, recalling millions of vehicles because they suck overall; but their stock value? It SHOULD be down there with Bear-Stearns...

What's B of A doing right now? I really don't follow them (because I had an account there once a long, long time ago, and they SUCK, like the opinion of 'Micheal Sincere' does). I had an account with B of A 20 years before Micheal's daddy got his first pre-pubescent erection. Fucking 'bears and bulls' bullshit... this dude's an OUTLIER, a simple repeating propagandized and edumacated idiot who seems to think that the numbers of some privately-owned 'stock exchange' actually mean something besides the fact that the value of the currency being used to 'trade with' is being DEBASED. The companies are not worth any more (they are worth less, in speaking of those that PRODUCE GOODS as opposed to NOTHING OF VALUE). LOOK at G.M. LOOK at B of A. Fucking GOOGLE builds NOTHING, MAKES NOTHING, and in fact TAKES INFORMATION from the users and the investors. IT IS like the rope that the people are buying to hang themselves with... but their 'stock value' (along with others like it) is what's driving this current run-up.

This 'Micheal Sincere''s picture looks like that guy who was hawking ENZYTE on those T.V. commercials. SERIOUSLY.

http://www.youtube.com/watch?v=ghrWz7cVXv8

Yeah. 'satire'.

'Market Watch' is the FED's BITCH. The 'ORGAN' of the FED MEDIA. They are like the FED's version of the BEATLES album ('FEDMANIA'). I tried subscribing once in about 2007, but their crap is overwhelmingly 'pro-central-banking-oligarchy' stuff.

Joe Izuzu was more fun.

 

esum's picture

14% of amerikans own any stock............... even a lesser number from a gloabal persepective..... so sit back and ENJOY THE CARNAGE 

 

MrMorden's picture

Dow to infinity and USD to zero.  Sounds like a plan.