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It's 2007 All Over… Except the Fed is Effectively Out of Ammo
The markets erupted last week to new highs on the Bank of Japan’s announcement that it would increase its massive QE program.
The Yen collapsed on the news and is now on the cusp of breaking a multi-decade support line:
While US stocks eked out a new high:
This move is very reminiscent of the 2007 top. At that time we had a top, followed by a quick correction and then a final blow off to eke out new record highs:
It is not merely the market that is mirroring the 2007 top.
1. Corporate debt is back to 2007 PEAK levels.
2. Stock buybacks are back to 2007 PEAK levels.
3. Investor bullishness is back to 2007 PEAK levels.
4. Margin debt (money borrowed to buy stocks) is at 2007 PEAK levels.
5. The leveraged loan market is flashing major warnings.
6. Corporate insiders are dumping shares at a pace not seen since the TECH BUBBLE TOP
7. Numerous investment legends have warned of a coming crash.
8. Investor complacency is at a record LOW.
9. The Fed has confirmed QE is ending this week, so the juice is cut off for now.
The Fed has succeeded in recreating the same environment that existed in 2007. Once again we have rampant risk taking, excessive leverage, and a stock market bubble.
The only difference is that WHEN (it’s no longer a question of IF), stocks collapse this time around, the Fed has already spent just about ALL of its ammunition.
· Interest rates are at ZERO, so the Fed cannot cut rates.
· The Fed has spent nearly $4 trillion in QE, so announcing a new QE program won’t accomplish much.
This leaves other minor policy changes, verbal interventions, and of course, the nuclear option of outright buying stocks. The Fed has been effectively doing this via QE for four years by giving money to Wall Street to buy stocks, but the Fed could always opt to do what the Bank of Japan does and simply buy stocks itself.
However, it’s not clear what any of this would accomplish. Stocks might move higher, but the accompanying economic woes wouldn’t go over well, especially given that the Fed is already in the political hot seat due to its total lack of oversight and its cozy relationship with the Big Banks.
Given that the Bank of Japan’s latest increase in QE was in fact made by a VERY divided board (the vote was 5-4 in favor of the increase), we can assume that the Fed would face similar pushback both internally and externally (particularly if the GOP takes the Senate).
In simple terms… we’re back in 2007, but the Fed will have very real limitations to what it can do when this bubble pops. And it will pop in the not so distant future.
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See previous comments RE: imminent economic collapse 90-120 days away.
Graham - how many years does this have to go on before you get it?
Let me spell it out for you - the new norm is that the central banks understand we are fucked because we are out of oil that can be cheaply extracted.
Effectively growth is OVER.
That is of course a bad thing. So they do whatever they can to keep the illusion going for as long as possible. Because when the illusion busts -- there will be no way to play this. You will be dead. I will be dead.
These are the only two articles you need to read:
HIGH PRICED OIL DESTROYS GROWTH
According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices. http://www.iea.org/textbase/npsum/high_oil04sum.pdf
THE PERFECT STORM (see p. 59 onwards)
The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel. http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf
you win the chartists award. and conditions are even more tenuous than 2007. my choice for chart indicators is the XAU:INDU. the divergence in 96 when gold stocks led the market down, and in 2003 they led the market higher. in ten years there will be at least one gold mining company in the DOW. BITCHEZ
If the economy was healthy and balanced we would not be experiencing slow growth while massive amounts of money are being printed and poured into the system. The crux of our problem remains in the fact that both people and governments have lived beyond their means by taking on debt they cannot repay. Over the last several decades we have created entitlement societies built on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances.
Promises were made on the assumption that the advantages we enjoyed would continue in both Europe and the US. Ever greater prosperity and entitlements were to be sustained through debt financed consumption growth. In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about evermore growth. Debt does matter and the following article delves deeper into why kicking the can down the road will ultimately fail.
http://brucewilds.blogspot.com/2014/08/modern-monetary-theory-is-wrong-debt.html
The Fed will run out of ammo when sellers refuse to take dollars. When the dollar can no longer be converted.
When the wheel barrel is worth more than the money in it.
The fed is not out of ammo, and never will be out of ammo, until human beings refuse to accept fiat.
In fact, that's the whole point of fiat... the predators-that-be can create unlimited fiat at zero cost. Which is why they control everyone else, and most of the wealth.
Eliminate fiat. Otherwise, predators always win.
Out of ammo?
Look at Japan today.
Remember Zimbabwe.
Remember Weimar Germany.
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Also, QE never tapered and never stopped. All they did is shift this activity to hidden and unreported ways (though observant folks can detect some of what they're doing... see Belgium investments for example).
if we could just properly value fiat, whats it really worth? those flat screen TVs are coming down in price, but the wife says she cant do the groceries on 200mo any longer. and what if that same TV costs twice as much next year? i better buy it now, and TVP for the kids
I see you've been paying attention. Exactly right, how else could they have purchased more than all the money they possess. There is no market, certainly not a free market nor are we truly a free people. Honestly you have it right Ann.
How can the Fed and the central banks pump money into the market?
To the extent this is done, is not the market a blatant lie?
Is there any way to track these amounts?
How is this not illegal?
Don Levit
Quote: There is no market, only manipulations.
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Sure it's illegal, as is almost everything the predators-that-be currently do. But since they're the one that file charges and prosecute... are you surpised they don't?
If the Fed and central banks are pumping liquidity into the market, then the market is a blatant lie to the extent this is done.
How can we ever find out the dollars being pumped into the market in this way?
Is it not blatantly illegal to do so?
Don Levit
The Fed is not out of ammo by a long shot. First, they can outsource - as you see - yen QE results in US wealth effect. Second, they CAN double the balance sheet. Not one person in 200 understands what's happening to the currency. Third - and this will dominate - as the US shows signs of life, whether fake or real, and brings interest rates off the zero boundary, all of the capital that flowed into the EM's will flow back into the US. This massive move will strangle them and crush currencies the world over. The dollar will in fact be the last fiat currency standing. If the Swiss pass the SGI, their currency will no longer be pure fiat.
http://www.dailymotion.com/video/xxq923_out-of-the-unknown-the-machine-s...
Sifi writers always seem to have it right.
The Machine Stops
The Fed is down to rhetoric which surprisingly still works to a greater degree than I would have guessed at this point in the deflationary process. PT Barnum was right.
But their days are numbered, no doubt...
http://www.globaldeflationnews.com/the-creature-from-jekyll-island-the-e...
In my opinion, the stock market will not crash - not now - not in the foreseeable future. The FED has demonstrated that it can prevent such an event, and will do so when it deems it necessary. Most corporations are approaching the limit of their buybank capabilities, and many insiders are selling. As profits stagnate a long bear market can be predicted - kept orderly by FED intervention through cooperating banks - indirectly and secretly. The risks involved in interest rate derivitives can be controlled by FED intervention in the yield cuve. Credit default swaps can be nullified by various tricks - this has already occurred. The largest remaining risk is margin purchase of stocks facing margin calls. The FED has the power to control margin buying but refuses to use it.
Need a really , really large amount of money quickly ?
Easy .
Just find a really large treasure , after defeating the dragons set to guard it .
This is actually true .
See
https://www.academia.edu/9096538/Great_Hidden_Treasures
You might also try
http://andreswhy.blogspot.com/2010/02/alexanders-loot.html
Then there is always old Atlantis Colony treasures .
http://andreswhy.blogspot.com/2011/11/atlantis-colonies-ii.html
if your'e feeling very brave , try the Matriarchs , though they are tighter with a dollar than a camels's sphincters during fly season (they should know , since a committee of them designed the camel (the original specs were for a horse in the Eastern Europe Steppes campaigns) . Oh , well .)
See https://www.academia.edu/9063568/Saflieni_armageddon
The largest treasure of all has just been unlocked and is bubbling to the surface .
See
What actually happened and is happening as we speak :
Japan has done another Pearl Harbour .
This time against the major oil producers .
See
The Smoking gun of Clathrate mining .
http://arctic-news.blogspot.com/2014/08/horrific-methane-eruptions-in-ea...
See also
http://andreswhy.blogspot.com/2014/09/rogue-swan-tech.html
http://andreswhy.blogspot.com/2013/04/petroleum-price-and-clathrates.html
http://andreswhy.blogspot.com/2010/09/mexican-gulf-oil-spill.html
Theyr'e using tailored archaeobacteria to release methane in a controlled fashion .
Very cheap . Seed the clathrate bed , then harvest the bubbles .
A high wastage percent , but it costs nothing .
This is what you are seeing in the
http://arctic-news.blogspot.com/2014/08/horrific-methane-eruptions-in-ea...
We're just seeing the leakage .
The Japanese Yen is going to laugh last .
This news is already breaking .
You saw it on ZeroHedge first .
All we really know is what they tell us, and there is no credibility in that. Maybe years from now some more will be revealed...Maybe
Remember in 2008 with all the Panic, threats of financial "sky's gonna fall", even Martial Law, unless Congress passed an $800Billion Bail-Out (took 2 votes to Pass). Then only to find some 3 years later its revealed that while this unheard of amount was causing a Panic in D.C., we found out that the equivalent of about 20 of these $800 Billion pocket-filling "Bail-Outs" (for the select few) were given away Secretly. And we only found out about this Admitted to amount via the Watered-Down version of Ron Paul's original Bill to Audit The FED. Yes, Ron Paul wasn't happy about the changes that were made. I'll show the Forbes Headline to show the best Spin they put on it. The Fed's $16 Trillion Bailouts Under-Reported - Forbes www.forbes.com/.../the-feds-16-trillion-bailouts-under-reported/Forbes
Sep 20, 2011 - The media's inscrutable brush-off of the Government Accounting Office's recently released audit of the Federal Reserve has raised many ...
Ron Paul, 3/31/2010, just prior to the vote, "I don’t expect the Fed to give up easily. I can see them destroying records before a true audit would occur."Months later we find that there was also some $9Trillion additional "Missing" from the FED ... likely part of what the Bill would have revealed had it not been watered-down
$9 Trillion Missing From The Federal Reserve. Why Should Any American Pay Their Taxes? InvestmentWatch
(Not to be confused with any of the Trillion$ the Pentagon DoD looses)
No it's not 2007.
word
HOW LONG WILL WILL ZERO HEDGE ALLOW THIS JACKASS TO POST HIS BULLSH*T?
WHAT HE IS SAYING IS NO DOUBT TRUE!
BUT HE HAS BEEN CALLING IT WRONG FOR OVER 2 YEARS!
TIMING IS EVERYTHING WITH SUCH CALLS AND IT IS NO CREDIT TO HIM IF ONE DAY HE IS RIGHT!
ZERO HEDGE...I VISIT THIS SITE LESS AND LESS BECAUSE OF STUFF LIKE THIS!
I AM WRITING IN ALL CAPS BECAUSE IT IS ONLY ABOUT 1% AS ANNOYING AS THIS GRAHAM SUMMER JACKASS POST!
Phoenix Capital is incognito representation of the TYLERS.
That's the only possible explanation. They own this blog.
Yep.
Reality sure sucks these days. I hate seeing it too
HOW LONG WILL WILL ZERO HEDGE ALLOW THIS JACKASS TO POST HIS BULLSH*T?
WHAT HE IS SAYING IS NO DOUBT TRUE!
BUT HE HAS BEEN CALLING IT WRONG FOR OVER 2 YEARS!
TIMING IS EVERYTHING WITH SUCH CALLS AND IT IS NO CREDIT TO HIM IF ONE DAY HE IS RIGHT!
ZERO HEDGE...I VISIT THIS SITE LESS AND LESS BECAUSE OF STUFF LIKE THIS!
I AM WRITING IN ALL CAPS BECAUSE IT IS ONLY ABOUT 1% AS ANNOYING AS THIS GRAHAM SUMMER JACKASS POST!
As long as they "OWN" everything, they are NEVER out of ammo
"especially given that the Fed is already in the political hot seat due to its total lack of oversight and its cozy relationship with the Big Banks."
Ummm. Hot news flash:
The FED ARE the big banks. Look under the fig leaf.
A round robin of central bank QE can go on a long long time.
Notional derivatives increased $6.1 trillion, or 2.7%, to $236.8 trillion. Derivative contracts remain concentrated in interest rate products, which comprise 81% of total derivative notional amounts. Credit derivatives, which represent 5% of total derivatives notionals, declined 3.4% from the first quarter to $10.8 trillion.
OCC’s Quarterly Report on Bank Trading and Derivatives Activities Second Quarter 2014
http://www.occ.treas.gov/topics/capital-markets/financial-markets/tradin...
Heh, what's a quarter of a quadrillion anyway?
The Japanese are firing blanks...not sure how their QE will help.
If that fails, Gideon Gono, I'm certain, would be willing to fire up the presses in Zimbabwe.
If that fails I suppose I'd be willing to kite a few check.
Committees may run out of options , but never fashionable schemes .
See an old example :
https://www.academia.edu/9094752/Why_is_the_Parthenon_not_round_
Exactly, so tired of doom and gloom when all the market does is go higher.
Zzzzzz....please wake me when TSHTF.
you can't predict the tipping point. sell your stocks today and book the profit. you will be able to tell your grandkids you beat the heard out.
All true but one can't argue with the markets
only corrleation that worked so far= Fed QE = stocks rising
Syria,Russia,bad earnings, slow growth, overvaluations,etc
all these don't matter today....
All bears -like me, only get squeezed at the market and in the pocket...(I am a bear only since 2013..before that i bought alot of stocks during the meltdown).
I decided to close 25% of my shorts to leave some ammo if the market continues to explode....
ive been a trader and investor for 25 years - never had such a bad year - lost 10% on my portfolio
and lost confidence
nothing worked for me...all my knowledge was useless
My biggest short is the Dax index, then the Russell2000 , Bio index and individual stocks
also bought the VXX
You don't appear to be one of them, but the entire financial services, money management, sphere that has cheered on the QE bond and stock buying need to be careful what they wish for. At points like this financial advisors, money managers, the buy side, those that really do their homework, are essentially replaced by the government and the Fed. Some day we may turn around and the government has taken over ownership of all equity, as opposed to only a portion as they have already done. After all, it would be for the people, right?
Didn't this guy say the same thing a year ago? And two years ago?
How many predictions does Pheonix Capital have to get wrong before they stop posting? They have consistently been wrong for the past 5 years.
This is too bad, because many well known figures, from Schiff to Prechter, have been making predictions about the market that have ended up not happening "yet", but I think most of us can agree many of these bad things are going to happen in the not-so-distant future. Some predictions are occurring in more of a diffuse manner than sharply, and all at once. The sad thing about all of this is that people are quick to note their timing failures and ignore the critical observations being made about the health of the market and why "this time is not different."
Keep it coming PC. Thank you for your insights. The communists can only hold up this market for so long.
Not wrong; just early...
"early" is like a half hour, an hour at most.
PC isn't early. Just plain wrong as a clock that is stopped is wrong but for a split half second, too short a time to even blink.
Same thing with respect to P/L.
Maybe an assasination or some kind of accident of some major politician or banker big wig! That might throw everything off balance very quickly. It is these kinds of unforseen events that will trigger the collapse. It won't be something that you "saw" coming!
AE 9/11 Truth researchers plan lawsuit to seek release of 500,000 documents held by FEMA, NIST
The similarity to the Sept/Oct price pattern of 2007 is interesting.
So is the sound one makes after ingesting a few gulps of helium.
#6, #7 and #8 have Already Proven to be irrelevant - at least while the party is going. Lastly, it is organizations like Phoenix Capital who are making the Major Miscalculation that the Fed is 'just about out of ammunition' or, will have 'limitations' as to what it can do. 'Derivatives' of this same argument have been made since QE-1... And about 'buying stocks'...? Assuming Phoenix Capital reads the same blog they regularly post on (ZH), have not they been paying attention to the articles about 'Citadel'...? Get with the program Dude. Ain't nothing severe gonna happen here with the market, outside of a foreign entity taking action/s that are outside of the Fed/Exchange Stabilization Fund control.
The Fed has been able to pump the market up with its surrogate banks but the question is this: can they keep the markets going up forever? can they keep the markets here indefinitely? I think not. They are running out of time and more importantly credibility as more people figure out the whole CON.
this charade has lasted for what seems like eternity and it has taken ZIRP to achieve it. But even ZIRP has its limits. Also recognize that it has not only been the Fed that has pumped liquidity into the markets, it is the COLLECTIVE effort of all the major central banks doing the same thing. This will not end well and it does come down to timing if you are going to catch the crash. Most bears have been blown out and don't have the resources or the fortitude anymore given the relentless bull move.
"out of ammo"... WTF, the print the fucking ammo every day
What did they use to rally the SPY 200 points in two weeks?
The more that's printed the less value it has. That's why Germany is telling the EU to shove it, they've been there before.
IMO, the Fed never had any ammo that would help the people of the world. They could only help banks ... and bankers have no interest in humanity, other than as debt slaves.
Not slaves, serf's, since serf's can be taxed.....
Banks should have a crucial desire to have customers. But of course it's more comfortable just being able to influence the law makers in a "desirable" way.... And so I guess it's much easier to please a few hundred law makers and politicians instead of trying to please a few million customers. It's even better if you get all the inhabitants forced to have a bank account. Because if things turn out sour, one just can get the money directly from the accounts - see Cyprus.