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Markets And Reality Disconnected
Submitted by Alasdair Macleod via The Cobden Center blog,
The behaviour of financial markets these days is frankly divorced from reality, with value-investing banished.
Markets have become distorted by Rumsfeld-knowns such as interest rate policy and “market guidance”, and Rumsfeld-unknowns such as undeclared market intervention by the authorities. On top of these distortions there is remote investing by computers programmed with algorithms and high-frequency traders, unable to make human value-assessments.
Take just one instance of possible “market guidance” that occurred this week. On Thursday 16th October, James Dullard of the St Louis Fed hinted that QE might be extended. In the ensuing four trading sessions the Dow rallied over 5%. Was this comment sparked by signs of slowing economic growth, or by a desire to buoy up sliding equity markets? Then there is the vested interest of keeping government funding costs low, which raises the question whether or not exceptionally low bond yields, particularly in the Eurozone, are by design or accidental.
Those who support the theory that it is all an evil plot will also note that governments and their central banks through exchange stability funds (set up with the explicit purpose of market intervention), wealth funds and state pension funds have some $30 trillion to direct as they see fit. The reality is that there is intervention across a range of markets; but most of the mispricing is in the hands of private, not government investors. For evidence look no further than the record level of brokers’ loans to buyers of equities, who with greed worthy of a latter-day South-Sea Bubble seek to gear up their speculative profits.
These are not markets with widespread public participation, buying dot-coms and the like. Instead ordinary people have given their savings and pension funds to professionals who speculate on their behalf. It is the professionals who talk about the Yellen put, meaning the Fed simply won’t let prices fall significantly. We can fret about who is actually responsible for market distortions, instead we should ask who benefits.
Governments: in the past they have covered their debts through a process dubbed financial repression, when artificially low interest rates and bond yields were the principal mechanism whereby wealth is transferred from savers to the government. This process still goes on today. Forget government inflation figures: when did a bank deposit net of taxes last give a positive return after your cost of living increases?
Zero interest rate policy lays the process bare, and turns savers into borrowers. Mr Average has replaced savings with mortgages and car loans. And while the elderly and other passive savers are still defenceless against financial repression, the process has taken on a new twist. The transfer of wealth to governments now targets investment managers.
Investment and hedge funds we invest with together with the banks which take our deposits speculate on our behalf. They think that with a Yellen or Draghi put underwriting markets a ten-year government bond with a two per cent yield is an attractive investment. In doing so they are transferring financial resources to governments in a variation on old-fashioned financial repression.
Our dysfunctional markets have become little more than the essential prerequisite, as Louis XIV’s finance minister Colbert might have said, to plucking the goose for the largest amount of feathers with the minimum of hissing.
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Pfucking the golden goose is more appropos.
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It's not really that markets are disconnected from reality - its that a small number of players are able to warp reality - like financial black holes, bending proper investment, naturally falling prices/increasing efficiency, and reasonable interest rates/coupons into the warped $-time that only occurs near printing presses.
End private central banking and you're halfway there.
Fiat is problematic but is not the basic problem - even more basic is having the issuing power be in the hands of a handful of European banking dynasties.
Keep an eye on Brazil and its central bank - this is one of those stories that should have been getting much more attention. It may well really be the Rothschilds that are really thinking to try to get control of Brazil's central bank. I don't think they understand the Brazilian mindset, quite. Then again, the old bankster dynasties are masters of deception and finding a weak link.
Stay tuned, fellow babies.
"...its that a small number of players are able to warp reality..."
Temporarily. It actually wouldn't be a problem if they could do it permanently, but they're not gods despite the strength of their beliefs to the contrary.
They think they are gods of the market but hubris has its price.....
"EZ street" concept only works for as long as idiots like ourselves continue to work for a living and allowing the leeches to oppress us and keep it all for themselves.
Unfortunately the world is overrun with idiots who cannot be blamed for they are conditioned to accept and support the status quo.
Please name something not disconnected from reality?
Gravity.
I reduce my required interactions with a psychopathic society.
It seems to be that the rule is that we can get along reasonably well if you are willing to at least act like you are part of the vapid illusion. Most importantly, don't poke the matrix of abstraction because if you do, the long knives will come out quickly.
That comment probably went better with the kardashian article...
It applies just as well here.
This has been my process to manage the world. Withdraw as much as practical and emphasize self sufficiency.
Apparently the stock markets disagree.
death
Hyperbole...
Oxygen.
my phyzz is real...although it's real-ly deep under water after that tragic canoeing accident sent it all overboard.
Me.
DavidC
No shit.
Something connected to reality......let me see........
Got it!
Sofia Vergara will NEVER call me back for another date.
A quadrillion dollars has really been printed and given to the Jewish Mafia on Wall Street, Fleet Street, and Orchard street and they have paid themselves multibillions of it to build mansions, 400 foot yachts, purchase the mose beautiful mistresses in the world, all over the world.
Really.
And meanwhile:
Dollar Decline Continues: China Begins Direct Convertibility to Asia’s #1 Financial Centerhttp://www.silverdoctors.com/dollar-decline-continues-china-begins-direct-convertibility-to-asias-1-financial-center/
This morning some of the biggest financial news of the year made huge waves all over Asia.
Yet in the Western press, this hugely important information has barely even been mentioned. (CNBC.com, for example, has yet to report on this story as of 11:45am Eastern…)
Submitted by Simon Black, Sovereign Man:
So what’s the news?
The Chinese government announced that the renminbi will become directly convertible with the Singapore dollar… effective tomorrow morning.
It’s clear this deal has been in the works for a while, and it’s another major step towards the continued internationalization of the renminbi and unseating of the dollar as the world’s dominant reserve currency.
Thanks Save_A for the highlight, I wonder whether Zero Hedge has any article upon this
In addition to Simon Black's article at above, read also the CNY - SGD direct convertibility here:
http://www.channelnewsasia.com/news/business/singapore/singapore-and-chi...
@Matrix2012
you're welcome. Speaking of "markets" though...the mining sector will most likely become the play of a lifetime when this low cycle begins to turn upwards. But it's not easy to know which miners to invest in. I struggle finding reliable info on these mining companies and I don't know what factors are going on behind the scenes that might make them a star or the next company to go bankrupt.
Many are mere shells of what they claim to be and/or are barely hanging on for life due to this ugly downturn against them the last few years.
But this what will make them explode once things turn around...they've never been lower than this before and so they will go to record highs in the near future.
Eric Sprott has a gold miners ETF (NYSE: ZAXSGDM) which has basically done the homework for us. http://www.sprottetfs.com/
http://www.sprottetfs.com/the-index.php
The index holds 25 strong mining companies, so you can either buy shares of the ETF or research the individual companies from the list here: http://www.sprottetfs.com/holdings.php
Then buy them individually if you like them...always do your own due diligence of course...but if Sprott has already vetted these miners and believes they're good enough to be in his index then it seems he's done most of the DD for us.
@Save_America1st
Thanks for the additional info, I'll keep a mind about those lines :)
Markets intentionally disconnected from reality.
It is why the heroin addict shoots up.
"The behaviour of financial markets these days is frankly divorced from reality, with value-investing banished"
'VALUE INVESTING' became forever banished in 1913
OT: This short video should go viral. An innocent man, an army vet, refusing to lie down on the sidewalk when ordered to by cops with guns pointed at him. A real hero who speaks for We The People in this police state.
"This Is Not A Police State"
Innocent Man Refuses to Submit to Lie Down Even With Guns Pointed at him.
Posted October 28, 2014
http://www.informationclearinghouse.info/article40075.htm
The way the camera was shaking, that man was terrified for his life
Why have reality when you have the Federal Reserve PhD economic academics.
Take the cheap Fed money and buy-back shares and boost the price, rinse and repeat.
I hope that this site continues to be bearish for at least 10 more years.
That's because--- just for spite ----those traders who have been pouring good FRNs into stocks on the buy side are trying to discredit Tyler and her cumps.
That's the only reason the markets are hovering at near all time highs, when in any alternate universe founded on reality would have the averages down about 50% from where they are, interest rates at a reasonable 5%, and the 10yr at quintuple its current rate.
How many people are trading this market on zero hedge. I trade IWM and thats all i trade. After watching this index carefully for the last 3 year i have seen the manipulation in this index pick up quite a bit. How can i see the manipulation you ask. I run a real time ticker of the index, and 7 real time streaming charts to pick up these trades i see as pure manipulation. Heres how it works. If they want to push IWM higher I will see a block trade go buy usually around 500,000 shares and it would be a sell almost always way below the bid today i have watched about 6 million shares go by in block trades of around 503,000 shares always selling at 111.02 then within a minute to 5 minutes i will see IWM move higher. Sometimes they will do this just to hold the price once it reaches the target they want. This is happening on the spy also. Its never about making money otherwise they would be losing a whole lot of money on treades like this. Its about controll and they do have controll. Last Thurs i witnessed 23 trades all 503,000 block trades each all 1.00 plus below the bid. This went on all day IWM was up 1.93 on the day. They do the reverse when they want to take IWM down, they will buy big blocks and turn around and sell off IWM. I even filed a complaint with FINRA and the SEC but they wont do anything about this that im sure of. But i also use to my advantage . Just pisses me off that they do stuff like this. Zero over and out
Why be pissed off? If you can spot these with any reliability, and have a 1-5min heads-up, why not trade them? Buy some cheap weekly puts or calls, or a straddle if you're not sure which way it'll go. You won't pay much for extrinsic value, and won't hold it long enough for time decay to be a problem.
I think we need to adjust our thinking here. The whole concept of interest was to correct for the possibility of default on money one loaned to another. Those with good reputation would be charged a smaller interest than a riskier borrower. But interest was tied to the DEBT, not to the money itself, and we have forgotten this very important thing.
The idea that one's money should "grow" merely by sitting there was a novel concept. A dangerous concept, because it allowed money to exert a control it should never have, and allowed the creation of this global financial empire.
We've changed our views on debt from those early days of arguing the morality of usury. Interest wasn't meant to become a source of profits, it was to compensate you for your risk...it was insurance against default, period, and was meant to be used as sparingly as the loans themselves were. And there were rules against gouging, the rate was not permitted to go above a certain percent. It was generally those down on their luck who sought such loans, as the wealthy had their own resources to fall back on.
This is why the old idea of Jubilee wasn't exactly the socialist wet-dream most think it is...in those days, few people HAD to go into debt, barring some unfortunate accident. If you were borrowing money, it was for something very serious, and you were NOT a person of means. So, those debts being forgiven could be accepted in the moral sense. You weren't letting deadbeats get off scot-free, you were helping someone in actual need. You COULD feel rather good about it, actually.
Today, you mention Jubilee, and you get an outcry from those complaining about the unfairness and moral hazard...well, yeah, but THESE days EVERYBODY has debt, and go into debt for the simplest things...it's how our economy is RUN. So, in a way, they are right, THESE days a Jubilee would have a different meaning. But that's not because the idea isn't a good one, it's because we have misused debt, forgotten what it really IS, and allowed it to extend so deeply into our lives that removing it will be extremely painful.
But it must be removed. And we MUST put debt back in its proper place...as a horrible, but sometimes necessary way of getting through a rough patch. Not as an acceptable way to finance your whole life.
All that the extension of credit and the resultant debt does is to allow some today to inflate the economy so they can profit off of the "growth". Their claim that business would grind to a halt without credit is horse-pocky. Business would indeed be able to 'grow', just not at the fevered pace that allows the big 'skims' so favored by those who live off the productive efforts of others. The "Take a nickel apiece from 100 million people" type of business strategy only works when we're talking about huge numbers. Business does not need that kind of growth, the finance industry that leeches off of business are the ones who need that. They HAVE to maintain the huge scale, and THAT is why they need the growth, growth, growth thing. And why they NEED debt to fund it, because there's no natural way to get that kind of growth in a finite world- you MUST borrow from the future.
We would SEE how wrong this is if we had a proper view of debt ourselves. And if we had a healthy view of what interest was, and its connection to debt, we'd be properly horrified at the central banks and Wall Street, and what they've DONE to the economy in order to profit themselves.
The news is pretty disconnected from reality as well.
I'm honestly pretty surprised at just how easily and uncritically the media and public bought into ISIS as the new, bigger, badder Al Qaeda, somehow flush with American weapons.
I don't think there's been a more obvious proxy guerilla force, maybe ever.
They'll keep pummeling Assad's pipelines from the air, take the odd pot shot at ISIS, but what they really want is to spread this into southern Lebanon - give the Israelis an excuse to invade for the...what....5th time? ISIS will avid Israel and Jordan of course. Just Syria and Iraq and maybe into Lebanon.
I suppose, if you'd never heard of PNAC, or the Oded Yinon plan it essentially regurgitated in a 5th columnist setting, you'd have no problem assuming a guerilla force could appear overnight flush with US weapons, and routing far superior opposing forces, all sua sponte, with no agency or othr government help.
But... no....even for Joe Six Pack with no experience in the military, or diplocore, or even just someone who reads... how can you just accept an overnight terror sensation having all sorts of US weapons and not want to know how they got them?
Rant over. Sorry.
All the world truly is a stage, eh, boys?
Did ECB start buying equities today or is Fed still ramping up ES all on their own?
Is my math wrong or does 4 trillion dollars equal giving every man woman and child in the US $20,000?
No Fear. strong $? doesnt matter. declining income to most americans? doestn matter. pulling forward months and years of demand? doesnt matter. gen X and millenials no where close to comparable earning power vs previous generations? doesnt matter.
then, what does matter?? maybe until cash on the balance sheet corporations decide enough buybacks have drawn down cash levels. maybe the staring contest between draghi and the german court.
maybe something we dont even think about yet. but as sure as night follows day and trees dont grow to the moon, this market cycle will end (and may have already).
cnbc already asked the question on 10/16: "what caused this downturn??" as though a cause is even knowable/observable
How many people here actually know whether value factors have been working in equity markets this year. The inconvenient answer is yes they have.
"Forget government inflation figures: when did a bank deposit net of taxes last give a positive return after your cost of living increases?"
Don't know why this statement was qualified net-of-taxes, no bank deposits have given positive returns after cost of living increases are factored in. The (insult of) taxes paid on the pitiful interest resulting from said bank deposit just makes it that much worse.
if it ain't broke don't fix it they say.As the market goes paralbolic. I thought POMO was over?I call BULLSHIT, or is this sideline money pumping this thing back to all time highs?
Today proves the markets do not need no POMO....for one day anyway.
I must believe they are juicing the market in some way but for today anyway they did it without no POMO...wuff wuff wuff....
i remember butchering the chickens on the farm. we would fill the 55 gallon drums with water and heat em with those big mobile burners. then take a hanger and bend the end over to catch em easy by hooking their legs. then over to the stump and lop off the head, watch em run around for awhile. then into the boiling water, pluck and hang em..........
those were the days
nice thing about chickens is they dont hiss