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David Stockman Warns, They Don't Ring A Bell At The Top
Submitted by David Stockman via Contra Corner blog,
This is getting downright stupid. After the minor 8% correction in October, the dip buyers came roaring back and the shorts got sent to the showers still another time. Earlier this morning the S&P 500 was pushing 2050 - or up 12% in less than a month.
So the great con game remains in tact. The casinos run by the Fed and other central banks can’t go down for more than a few of days—until one or another central banker hints that more free money is on the way.
A few weeks ago it was James Bullard hinting at a QE extension. Next was Mario Draghi pronouncing that the whole ECB is unified behind a plan to expand its already swollen balance sheet by another $1.2 trillion. And then Haruhiko Kuroda, the certifiable madman running the BOJ, not only announced his 80 trillion yen buying scheme, but soon averred that falling oil prices—–a godsend to Japan—–were actually a threat to his mindless 2% inflation goal that might necessitate even more money printing. That is, after buying up 100% of the massive Japanese government bond market, the BOJ would not hesitate to monetize ETF’s, stocks, securitized real estate debt and, apparently, sea shells, if necessary.
Accordingly, bounteous wealth is seemingly to be had by the three second exercise of clicking “buy” on the SPU (basket of S&P 500 stocks). Indeed, for the past 68 months running, the stock market has blown through every mini-correction, and has been traversing a near parabolic rise.
Needless to say, this relentless expansion of the bubble eventually kills off the bears, the skeptics, the prudent and even the militantly incredulous. Undoubtedly, that is where we are now because the global economic news has been uniformly negative since the October dip, yet the market has resumed its relentless melt-up.
Under such circumstances, therefore, it is well to remember that we are in the middle of the greatest central bank fueled inflation in recorded history, and that this insidious inflation has been channeled into financial assets owing to the arrival of peak debt everywhere around the world.
Stated differently, households are saturated with debt and cannot borrow any more to spend on goods and services that have not been earned with prior production. So the massive tide of liquidity generated by the central banks never leaves the financial markets; it just cycles there, fueling the carry trades and every manner of speculation that modern technology-enabled bankers can concoct.
But that is the Achilles heel of the game. As the bubble takes on ever greater girth, it becomes increasingly susceptible to a negative shock to confidence. Part of the reason is technical. When markets reach their current nose bleed levels there are no shorts left; and it is also likely that the day trading gamblers have become increasingly lax about absorbing the cost of even cheap “downside insurance” (i.e. puts on the S&P 500). That is, they are “long” and “unprotected”.
So if a sharp, sustained self-off gets underway due to an unexpected blow to confidence or the arrival of the proverbial “black swan”—- there are no shorts to cover and take their profits by buying the market as it craters; and there is a simultaneous scramble among the buy-the-dip longs for downside “protection” in order to ride out the storm. But in this context, market makers who sell such protection are not in the least inclined to write insurance or puts on a naked basis. So they sell the index short in order to cover their exposure, thereby adding to the downward momentum.
That is part of the reason why central bank driven bubbles expand relentlessly for years, but then correct swiftly and violently in a few months or even weeks when the bubble finally cracks. Thus, the S&P pattern shown above unfolded in a similar manner during the 2002-2007 Greenspan Bubble—–and then crashed after the Lehman event.
During an appearance on Fox Business yesterday, I had an opportunity to address this pattern in greater detail in response to the skepticism of the show’s free market host, Stuart Varney. "Kuroda is a certifiable madman"
Yes, you can “loose” a lot of money on the way up. The problem is, no one rings a bell at the top.
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thought they rung the bell everyday?
This fucking mess rang my bell at least five years ago and my ears are still ringing.
I won't take no prisoners won't spare no lives
Nobody's putting up a fight
I got my bell I'm gonna take you to hell
I'm gonna get ya satan get ya
Hells bells
We will soon look fondly back on the days of $16/oz silver, $1200/oz gold, retards wailing for $1/3min on iTunes, the remnants of immigration law, and a kinder pre-Kardashian-litter internet.
On a positive note, your average Walmart shopper has not yet banged an internet-celebrity. So the shit-show has a glide-path towards social networking/advertising nirvana. Buy buy buy!
This Kyle Bass interview from Jan. 2013 is as relevant as ever:
https://www.youtube.com/watch?v=LDs_vnyzmWU
Yes. Reality has a habit of remaining relevant; unllke mass opinion.
stockman must have never seen cnbc, they have top hats.
It's a fact: macroeconomists have correctly predicted 9 of the last 3 corrections.
how much siler did you buy at 38 an ounce?
Ten shiney silver dollars. Yes its my fault silver took its big dump. I alway buy at the top and i have swore off buying anything so this may go on forever.
nope. my fault. ask my wife.
Some... but much more at $4, $8, $14 & $20. Belive I'll hold for awhile, but thanks for the memories.
Ring ring, ring my bell
7 trillion could be recycled for decades...prepare for the best fucking market of all time.....ever
I have a lot of respect for Stockman (even though I think he's a bit of an ideologue who could learn from his contemporary Paul Craig Roberts), but he fails to consider the fact that bubbles pop when the CB's allow them to pop. Will the Fed decide to pop the stock market bubble in the next few months or few years? Maybe, maybe not. He's still focused on fundamentals which mean jack fucking shit for the market. We could have a Mad Max scenario in the real world, and the market could still be making new highs each week.
I think he says some of the things he says so the he is still acceptable on TV, kinda like schiff. And it's important that some people like them are still considered 'respectable' enough to invite on TV(even if it's largely to tell them they are wrong. I like PCR too, he does an excellent job or identifying the problems, I just don't always agree with his solutions, as they typically involve too much central planning, just the 'good kind'.
"he fails to consider the fact that bubbles pop when the CB's allow them to pop"
I wonder about that. I hear this line of thought all the time here, the implication that the Central Banks are able to keep this thing under control from A to Z. Me, I think there might be moments when it's no longer their call and things start to slide whether they want it or not. I think we witnessed one such moment in 2008, when they were pissing their pants as much (or even more) as anyone else.
The fact that the meme exists on Zero hedge is less than meaningless. What Stockman is pointing out is that markets are positive feedback loops; all positive feedback loops are oscillators they go from extreme to the other. A pendulum is an example of a positive feedback loop Rising prices attract buyers which cause prices to rise; falling prices cause selling when causes prices to fall further; because of human psychology. The Fed. which is the US Central Bank doesn't buy stocks, and are 'in control" of much less, than the knowledge free group of opinion holders on this blog imagine.
Bear in mind the mechanism by which the Fed keeps rates low ... they simply, outright buy bonds.
The problem here, as highlighted on ZH, is they can't buy ALL of them. Banks need these assets in the system ... its like oil in the engine of financialization. The Fed is slowly draining the oil and at some point banks are going to have real problems (may already be happening) where they are running out of high quality cash-like collateral that underpins everything.
To be clear, banks often make money by borrowing short (low rate) and lending long (high rate) and pocketing the spread. If short term lending assets (i.e. high quality cash like collateral) becomes unavailable, they will have to sell off the long term assets to cover their ass.
But when the Fed stops buying to keep rates low, the market will want to price yeilds higher. This creates its own set of problems as the spread between the short and long lending starts collapsing. Further, rate sensitive stuff like bonds will drop in price as well.
To be clear, ongoing funding costs go up and the price of assets goes down. If it gets enough momentum, it is self reinforcing.
The system is fucked, one way or the other. It will implode at some point. If the CBs don't overtly do it on their schedule, it will just happen at some point anyway because IT HAS TO.
I concluded they are going to pop this fucker, but I don't think their plans are working out. Syria didn't go kinetic. Ukraine didn't quite pan out the way they wanted either. They are desperate for a war to start so they can pop the bubble they created - it is the only way they are not directly held responsible - but the sheeple are wising up and aren't buying this shit after Afghanistan, Iraq, and so on.
If Putin keeps hanging in there, the West may very well experience the collapse without a war.
Regards,
Cooter
When the CB's allow them to pop ? Bollocks.
They pop when the frauds can no longer be hidden.
Thats what happened in 1973,1987.2000, and 2007/8.
CB's aid and abet the frauds, until they can't.Thats exactly where we are now.
CAC40 lower low, and lower high in the making. 200 ExpMA broken and heading south. A close below 4150 will see end of short term rally.
This bell is clanging!
My guess is european markets are leading and US still breathing Nitrous.
Draghi delaying pulling the trigger until it's really needed, that may be very soon!!!
Might be an interesting week!!!!!
I think the CB wusses are pretty concerned about avoiding Mad Max and the more disconnect between the real world and their financial empire the worse their ultimate worries will be.
Let's face it - they've been able to milk the real world for so long without anyone knowing about their scam, that this increasing disconnect will threaten them more and more. It's this that they can't control. The stawk market will become increasingly irrelevant as fewer and fewer in the real world hold or benefit from the rigged market. Have you noticed the anemic volume? This is already true in most of the developing world. And these are places where it's pretty tough to live as Daddy Warbucks.
I went to the original blog to see if David Stockman actually said; "near parabolic rise"; and was amazed to see that he did. I didn't know he was illiterate in English and doesn't realize that price charts are never parabolic, although they can demonstrate an exponential rise; and furthermore functionally blind; as this is obviously a straight line price channel; a linear and not exponential rise. Very disappointing. I thought there were still some educated persons around from his age group at least; who knew the definition of common english words; apparently ignorance is the new normal. Very disappointing.
He said 'near' - descriptive only. Anyhow, look at price channels on that chart and it does start to imitate a parabola.
Central Banks are the scourge of humanity.
Mankind is the scourge of humankind.
of course, the war on vlad will cover it all up - right?
It's a CB money heroin fueled market. Stockman and many here predicted a couple of years ago that it would follow the course of Kurt Cobain, but it's looking more like Steven Tyler.
"...the BOJ would not hesitate to monetize ETF’s, stocks, securitized real estate debt and, apparently, sea shells, if necessary."
Watch them do it! Stockman dead-on yet again.
2000 tech. bubble, 2007 housing bubble, 201? student loan/auto loan/re-loaded HELOC monetary madness bubble!
I have champagne in the fridge for when this one pops.
Some seashells are very beautiful, & possess an almost unchanging quality, like a pearl.
Compare that to readily defaulting real estate debt, issued by slick conmen & securitized by even slicker conmen.
Stockman says seashells by the seashore are especially slick.
Especially if the are glowing from Fukushima radiation!
Kuroda, to the moon! Banzai!
Fraud has no top. Barring catastrophic events such as an ebola epidemic in the US, a nuclear meltdown somewhere in the US, a major war, an environmental disaster big enough to affect the economy for decades, a bond market collapse in Japan, the fraud called the US market will only keep rising.
The only bells that have been ringing have been for the shorts as they get burned daily by the fraud and corruption of a manipulated market.
space station crashing into the Capitol. That would be good for a two day sell off
Maybe a day or two sell off, but think of all the construction that would follow. Gotta clean all that shit up, then build a new and better capital building and space station. Bullish!
You're completely wrong. Keep Observing; you're going to see something very interesting. A famous newspaper quote from 1929; was to the effect that "stocks have reached a level of permanently high prices"; or something similar.
ding a ling a ling a ling
ding a ling a ling a ling
ding a ling aling aling.
hello, janet, could you spread your legs and queef out some more bitcoin for the goyim? the groundlings in fergusen are getting restless again.
I suppose the guy (interviewer) might just not understand the monetary system but he comes off as a cheerleader. If he was just stupid he would not be so derisive.
So debt is an asset class like energy, gold, and real estate, with nothing backing it except threat of violence? Who knew?
Here is a prediction you can frame even though I think that time line predictions are dangerous.
AT 2200 POINTS FOR THE S&P THE MARKET WILL COLLAPSE
2500, 3000, 6000, even 520000... this is non sense, any numbers you get from this is pointless unicorn in a digital world. the reel world is now on a parallel side of the finance world.
they go their way.
this is infinite timeline now, they have succed to disconnect those who work in reel economy to get food and home to those who play WS nintendo to play with numbers.
this is no more same planet they are living.
I was once watching a few items on ebay being sold by the same person and I was surprised both by the level of bidding given the days left to bid.
I then checked the bidding history of each of the bidders with this seller and found that virtually all their bids were for this seller's items.
In other words they were propping up the price while waiting for a sucker to jump in.
I guess much the same is being done by central banks and governments and companies buying back stock.
I've seen that happen too many times myself. The game is going to get run whether little players or big players. The players used to be seniors. Now they are somewhere between high school grad and college sophomore. What a f..kup. And now these dickweeds are playing the game at the top of the monetary structure.
Stockman, just another old crank ranting about how he missed the biggest bull run in history. Or is he the type of guy who's screaming for a collapse, but is long stocks anyway?
Newsflash, DJIA is up 11,000 pts in 5 1/2 years, anyone who didn't make some money off that is an epic loser.
Sold, have you? Converted your paper profits into cash?
Yeah, sure you did Isaac, the South Sea Trading Company is still going strong! You'd be a fool not to get back in now!
Reforming Government is a Certainty.
Sooner or later. Complexity you speak of is antithetical to good Governance.
Reforms:
- Streamline & Reduce Laws
- Reduce Fees & Licenses
- End Lobbying & Gift Giving to Justices, Politicians
- Reduce the Many Financial Streams for Organizations, including Federal Guarantees
- Flat Income Taxes with maybe 5 Tax Credits
- Simplify Business Structures, no Shell Companies, fewer Big out of state or out of country financing (it is coming)
- Simplifying Business Environment would mean reducing the power of Transnational Corporations & US Zaibatsu Defense, Banking, Telecom, IT, Drug, Agriculture, Corporations
- End the Money Trust, Use Anti-Trust Laws against Banks
- Make Corporation good citizens or charge them import tariffs
- End so called Free Trade since slaves are used in other countries and there can never be any auditing
- Move Power, taxes, business incentives back to the Individual States, encourage state financing be used, make financing power in states equal to TBTF Wall Street banks
**The Vision of a new USA is Simplicity, Standard Accounting, Standard Financial Instruments, Flat taxes, ... fewer Entities taking a piece of the action**
- Complexity breeds corruptions, even universities get corrupted by outside financing, this means "US Science" has been damaged by Capitalism
- Suggest Public banks instead of private banks, why do Private Banks get to be Prime Dealers in a Monopolistic Banking System with Federal Reserve???
- Why Bailouts & Bail-ins?? Because the Complexity and work of Lawyers & Bankers to make the system complex... It was a Psyop on the US Voters, Work Force, Business Owners, and Government
- It is Financial War of Bankers Against the Idea of The United States of America
what an assshole. He down voted me after 4 weeks.
can you see who voted ?
Well take a look, University of Missouri Professor of Economics Videos. MMT is the current Official US Economic Theory... But lo and behold... here is a Professor talking as a Rebel.
http://www.youtube.com/watch?v=_d6D_QvtTmg (Michael Hudson Video, talks about Predators, what Greece Expected by Joining a United Europe, How they got hijacked by the Bankers, 2011)
----
http://www.youtube.com/watch?v=iJb7V_UUbqk (Michael Hudson Video, Social Security, Simpson-Bowles, Getting Rid of Tax Credits for Mortgages, Fake Crisis for bankers)
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Michael Hudson: Finances vs Economy, Credit vs Money [3/18 ENG] ...Sounds like lots of ZH people agree with him on Greece & Financialization of Debt & Government in order to steal the assets.
http://www.youtube.com/watch?v=JZQqrxHGcoQ Whole thing is good!
Bullshit. They ring a bell and his name is Jim Cramer.
Stockman is a fine fellow but he's stuck in the past, he still believes that stuff in his college textbooks applies.
It doesn't.
I'd love to see his analysis based on some more post-neo-nwo thinking.
Does he ever read ZH and the wisdom of the comments?
"Stockman is a fine fellow but he's stuck in the past, he still believes that stuff in his college textbooks applies."
Have ya read The Great Deformation?
I really don't think Dave's looking in any college textbooks since he's been there and done that at levels that most ZHers can only fantasize about.
The basic premise of the book is exactly "based on some more post-neo-nwo thinking." exept it traces the HISTORY that led us to the current place we are.
And having read ZHers comments for a while I can safelt say that many posters here need to realise that history did not begin at their birth and that the shit you was learnt in skrull is a pile of shit.
I've read what seems like dozens of excerpts of his book in his columns here on ZH.
He has done stuff, but he did it in the old world and he's stuck there.
Time will tell. He's probably right in part, capitalism hasn't gone away entirely ... yet. OK, it never will go away entirely, but it's quite possible that some large parts of it have gone away for the duration. Maybe the central bank *has* to print money anymore, for western economies to work. Stockman doesn't think so. Bernanke suspected it, increasingly. And maybe parts of classic capitalism were just never fully worked out, like the limits of Ricardo's comparative advantage when you take it to the limit and ship *everything* to China, a nightmare Ricardo thought would never, ever happen, who would suicide like that?
If the shit I learned in school was shit, it was the same shit Stockman is still spouting.
Nobody rings a bell?
Sure they do.
Nobody listens!
Embedded link didn't work for me the first time around:
http://video.foxbusiness.com/v/3890186858001/is-the-stock-market-going-to-crash-again/#sp=show-clips
David Stockman Warns, They Don't Ring A Bell At The Top
Sure they do. David knows this all to well
https://www.youtube.com/watch?v=FcMgt3JQDxw
The bell at the top is cracked like the Liberty Bell and does not ring anymore because the oligarchs don't want anyone to hear it ring for fear of awakening the masses to rise up and slaughter the oligarchs. Stockman, while a nice intelligent scholar, is not exactly pointing people in the right direction IMO. The latest bubble is expected to blow, and will blow soon enough. Propaganda cannot beat mathematics in a game of mathematics
as far as I know.
Japan is done. The US Federal Reserve's grand printing experiment will end in pain.
Bernanke and the rest of the Fed plotted Japan's econonic plan.
Monetization of papers has nothing to do with people who in the first place do not own them. Problem remains with not enough preys still listening and running away with portable real assets OR to safer terrains.
Predators starting with the financial types can just exhaust faster if there is no co-operation. Not advocating violence.
1600's - tulip mania
...........
1999 - dot.com
2008 - sub-prime
Markets don't change, it's human nature.
humanity self break at the point when technology by lazyness replace parents's education.
started in 2000.
when 2 generation of humans get self raised with battlefield & need for speed moral values, red button is pressed in the hour.
expect around mid century.
human nature is self destruction, coz it do not give a shit about itself.
The only thing I know: Step back and look at the economy of the world over the last 1000 years. Up and Up. You have to take your microscope out to see the downs.
You don't even have to be smart, S&P 500 is good enough. My son whined when the S&P 500 was going down, I remarked: You buying or selling...
That bell at the top is usually selling volume. And up to this moment volume it is not there. As long as prices levitate without friction (volume) the top could be at even higher prices. Anything can happen, of course, but if a mayor top presents in the normal way... volume will be there.
The top of what?
The dung heap?