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5 Things To Ponder: Unstoppable Force Paradox
Submitted by Lance Roberts of STA Wealth Management,
As we enter the final month of the year, the markets advance got me thinking about something known as the "Unstoppable Force Paradox." While you may not be familiar with the name, you will certainly know the definition which questions "What happens when an unstoppable force meets an immovable object?"
Even Frank Sinatra sang about it in "Something's Gotta Give:"
The paradox arises because it rests on two premises—that there exist such things as irresistible forces and immovable objects. The paradox is that both cannot both be true at same time. If there exists an irresistible force, it follows logically that there cannot be any such thing as an immovable object and vice versa.
However, that has become the general view of the financial markets currently. As discussed in yesterday's missive on excessive exuberance, investors have been lulled into a state of complacency due to a seemingly "unstoppable" rise in the financial markets. Bad news remains good news, and even small drawdowns are quickly reversed sending stocks surging higher.
Eventually, the paradox of what happens when a seemingly unstoppable force collides with an immovable will be answered. Historically, such realizations have not been kind to investors.
This weekend's reading list takes a look at the reasons why stocks could rise higher, and the potential they won't. The question to be answered is "What will you do when the immovable object is met."
1) Stocks Set For A Santa Rally If No Bad News by Adam Shell via USA Today
"The combination of seasonal strength, strong business fundamentals and valuations at or below long-term averages increases the odds that stocks can continue to rise into the year's end, perhaps as much as 2%, says Sam Stovall, U.S. equity strategist at S&P Capital IQ.
"In support of history, we think the S&P 500 should do well in December," Stovall says. "Our projection for solid November employment gains (when the results are released Dec. 5), our forecasts for improving holiday retail sales and the prospects for better-than-expected fourth-quarter profit growth should help maintain the market's upward momentum."
2) Sorry, Santa Won't Deliver Year-End Gains by Mark Hulbert via MarketWatch
"For this column I surveyed the several hundred advisers monitored by the Hulbert Financial Digest in search of a precise definition for the Santa Claus Rally. I came up with three more or less distinct possibilities, and I subjected each to statistical scrutiny."
1) The Stock Market Rallies At Some Point During December
2) December Tends To Be A Good Month For Stocks
3) Stock Market Tends To Perform Well Between Christmas And New Year's
"The bottom line? For this definition, as well as the first two, the statistical basis of the Santa Claus Rally is too weak to make it worth the bother."
3) The Fed's Economic Coup - Why Every Asset Price Is Manipulated by David Stockman via ContraCorner
"Now in a recent forked-tongue effort to deny the existence of a Fed “put” under the stock market, Goldman’s plenipotentiary at the Fed, perhaps better referred to as B-Dud, has told us exactly that. If the monetary politburo deems that the nation’s economic bathtub is not full to the brim and therefore requires 'extremely accommodative' policy, the central bank will indeed deliberately pump-up the S&P 500 to achieve its misguided ends."
4) James Montier: "Stocks Are Hideously Expensive" via ZeroHedge
"Four words seem to define the current mood in financial markets: There Is No Alternative. Yes, equity markets might be somewhat expensive, but considering the alternatives – bonds and cash –, they are still the best investment. The correction in October turned out to be a mere hiccup in a solid bull market.
But James Montier remains skeptical. The value investor and member of the asset allocation team at Boston-based asset manager GMO sees the stock market in a near-bubble and warns investors from being complacent. 'To think that central banks will always be there to bail out equity investors is incredibly dangerous,' says the outspoken Brit. His source of wisdom in current markets comes from none other than Winnie the Pooh: 'Never underestimate the value of doing nothing.'"
Read Also: It's Painful Waiting For The Bubble To Burst via Comstock Partners
5) A Rising Aversion To Risk by Michael Kahn via Barron's
"Interpretation of the economic implications of the changing relationships of asset classes is beyond the realm of technical analysis. Still, action in the global bond market is hard to ignore right now with U.S. and many European government bond prices rising while riskier junk-bond prices are falling.
This suggests rising risk aversion. Despite climbing U.S. stock prices, the credit market's action—with yields on government obligations falling to unprecedented lows while riskier credits' yields are rising—implies nervousness about the global economy. Perhaps—though drawing big conclusions about the global economy is well beyond the scope of this column.
In my view, the bond market is telling us two things. First, low yields across the globe point to economic weakness, which is being met by ultralow rates set by central banks that are likely to persist. Second, risk aversion is growing even as the Dow Jones Industrial Average notches new records. Taking it easy with your money is probably a good idea."
Read Also: A Stock Market Correction Is Imminent by Lawrence McMillan via MarketWatch
Chart Of The Day: "Something's Gotta Give"
"In 1979, an unstoppable force met an immovable object. Chuck Norris kicked Mr. T in the jaw. The result was the '80s." — Chuck Norris Facts
Have A Great Weekend
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"Everyone has a plan until they're punched in the face"
~ Iron Mike
Nice quote, but I think this one is more appropriate:
"Everything works........until it doesn't"
Who Knows
Piling on with a philosophical bent: "Time is nature's way of making sure everything doesn't happen at once."
"What happens when an unstoppable force meets an immovable object?"
Is this a reference to 9/11?
Everybody loves the speed when driving down a mountain untill they figure out the brakes don't work anymore.
Well, when marky goes up, most everybody wins.
Everybody loves a winner. So what. Go with the flow.
Thinking your goldbug attitude is worth is shit?
You've been proved wrong. IF you are proved right, then it won't matter for shit. Gold is valued in DOLLARS, those fiat things.
I've bought silver thru out and aint's worth a fuck. I'm ok with but going with what's going forward. Good, bad or ugy, just go with it.
Your comments are a disgrace to everyone with a brain everywhere. Yea, don't think; Follow the leader. Moron. Bozos like you are the reason 'sheeple' are called 'Sheeple'.
my classmate's step-sister makes $61 /hour on the laptop . She has been out of work for 5 months but last month her pay check was $12417 just working on the laptop for a few hours. browse around this web-site... www.yelptrade.com
Yup, something's gotta give: http://www.usdebtclock.org/
+1 for Sinatra and the charts (S&P looking bubbleicious!).
Pump up the jam, pump it up!*
Pump it up a little more... Get the party going on the dance floor...
See 'cos that's where the party's at...
Smoken, token, and I aint joken.
G's up, hoes down, while you motherfuckers bounce to this
Cross burnings, dead black people, entire cities aflame. How could the news possibly be better?
Not that this won't demand an immediate need for greater spending on anything other than Project Mayhem.
What happens when an unstoppable force meets an immovable object?"
The better question is when will the force meet the object...
The Federal Reserve has not vanquished the business cycle.
Looking forward to "unstoppable" facing off against a (bad) recession
Put me down for
Reality with the KO
December is usually a very dull month - Typcially a snails pace squeeze higher on low volume Zzzzz
and all this talk of unstoppable pure nonsense.
Earnings are high
Buybacks are high
Both trends will end soon enough
Whether we're at the end of the American Empire or not, I wouldn't hazard a guess. I don't think so, for whatever that's worth (which is exactly what you paid for it).
But even if we are at the end of it, empires tend to fizzle out rather than blow up. The main historical examples are the Roman Empire, the Ottoman Empire and the British Empire.
another dooms day scenario :D
this piece misses the point. whether "the market" goes up or whether it goes down it is the fed which sets the price. there is no market, there is only the fed.
If you're not inside, you're outside, okay? [/Gordon Gekko]
And of course the Fed is....Always wrong, but never in doubt.
There never was a credit cycle. It was Barzini all along. [/the godfather]
ZHers, you can sit back and philosophize all day, or you can join the party. The Fed has engineered the greatest, most spectacular economic recovery IN HISTORY. Millions are beholden to the Fed for restoring their lost wealth, plus much, much more. Millionaires are now billionaires. Millions of middle class watch in awe as the 401k’s soar day after day. More job creation than ever before. Low paying jobs means nothing, there are government handouts. Five TRILLION dollars was created and handed out to anyone wanting it. Under the ‘New Normal’ the Fed bankers have agreed to stand behind the markets and offer full support, “whatever it takes”. If they have to create another five Trillion $, they will. Too big to fail. Debt has lost all meaning. The government deficit could double to $36 Trillion; it is now meaningless with near zero rates and limitless printing. Consumers are again getting access to easy loans and are on a wild buying spree. Vehicles are almost free with 8-9 year low interest notes, and little down required. They will soon fully re-inflate the housing bubble and the refi cash extraction party will resume with a vengeance. This time people will only have to swipe their I-Phones to get instant $ added on to their home loan for purchases. There is no inflation, so far. If the banks do fail, they have 100% assurances of bailouts.
If bears think the party has to end soon, good luck. Fed worship and faith in Fed has NEVER been stronger. The results prove their models work perfectly on a greedy and materialistic society. There is not one bearish argument that has proven correct since QE began 11,000 points ago, and more to come...
Your best course would be to lever up. You really can't lose.
TT,
I can't decide whether to up or down arrow your comment. I I've been an unrelenting bear, a contrarian, shorting equities and going long metals and miners this entire bull market. Someone said on another thread that ignorance is bliss... true, true... If I hadn't investigated and followed ZH, Schiff, Rickards, Willie, KWN, et al, I would be in a much different, much better situation today. Add to that the daily input from the "uninitiated", the "uninformed", the "ignorant", who blindly invested in stocks. In not conciously choosing, and simply "following the crowd", well, they've been right. It's a bitter pill, but a switch in strategies could be in order and, as you put it, join the party. It's sickening to imagine not doing this and watching the dow hit 20,000.
beachdude
you missed a turn and got off course. You understand what 'should' happen. What always does happen is different. The banks will be saved. The currency will be sacrificed. I shorted gold (the paper stuff not the metal, I'm long that) and bought the market. Actually I shorted the Yen because that is what is being used to buy the market. This will work as the system allows the dollar to go Weimar. Doubt that?
Give me a single example of a fiat currency that became more valuable as the underlying economy tanked. It does not happen. If currencies strengthen governments print more and use the extra to their advantage. They do not allow frugal citizens to reap that benefit.
lasvegaspersona
"you missed a turn and got off course. You understand what 'should' happen. What always does happen is different."
Your insight is accurate... and you don't even know the half of it.
But, you are 100% correct. Interesting how I still expect to have happen what 'should' happen in these matters. I continue to believe that it will.
Eventually. Hopefully soon. Like next week.
Just because you swallow Fed Jiz doesn't mean anyone else does or will. Fool.The blind lead the blind and they all fall into the ditch. You, sir, are a blind follower with no Soul and no Integrity.
TT
I'd read this before you lever up: http://fofoa.blogspot.com/2014/12/global-stagnation.html
Your observation are accurate but what is required for your suggestion to be valid is this: the rest of the world must continue to hold that cash as reserves and savings. If there is a change due to loss of faith or to a change of plans, the dollar could go to zero in an HFT nanosecond.
Do you get up every morning and have a bowl of Dow Jones Industrial's for breakfast? Do you find it nourshing? I guess there is no inflation you see then. Perhaps, you may wake up in mid January hungry and wonder what the fk just happened. If I were you, I would just smile and BTFD. Perhaps, you should do what the bears do, and hybernate for the winter, or perhaps the next 4 to 8 years. When you wake up you may then start to see some green shoots. Enjoy the present, and what ever you do ignore the future.
"There is not one bearish argument that has proven correct since QE began 11,000 points ago, and more to come..."
1+1 still = 2. The FED cannot supercede the laws of math, no matter how hard they try.
"The Fed has engineered the greatest, most spectacular economic recovery IN HISTORY."
There has been no recovery.
U-6 unemployment is over 11%. That doesn't even include the number of people who gave up.
Ther was a new record 92.6 million not working, a few months ago.
Lance with his chicken bones and goat entrails trying to guess what the fed gangsters will do next. It would be laughable were it not quite so pathetic.
FWIW Sinatra was a mobbed up hack...
Poor Dorothy Kilgallen-- we need women like her now. An American Heroine.
Release the asteroid !
Santa Claws
Glassman and Hassett redeemed...DOW 36,000 here we come. If Zimbabwe can do it surely a country like the great USA can do even better.
When unstoppable force meets immovable object, you get a Big Bang which sweeps away the whole Universe and creates a new one.
Many of us the are far from optimistic. While the future is hard to predict, as in politics the people who watch and study the economy are becoming more polarized as to the direction of the economy. Many of us are slipping into one of the two distinct camps, one that sees this as an economy slowly on the mend with the worse behind us and the other who clearly takes the position that things are not working.
Not only have things gotten worse but the distorted economy and manipulated markets only mask the fact that a day of reckoning is fast approaching and we are facing a bigger and meaner economic set back then any the world has witnessed in modern times. More on this subject in the article below.
http://brucewilds.blogspot.com/2013/08/after-big-crash.html
"What happens when an unstoppable force meets an immovable object?"
Water flows, shit floats.
This is wealth, not anything without any intutitive understanding, like quantum physics....
What I don't understand is what the immovable object is supposed to be. Everyone seems to predict a crash. That history tells us the market is overpriced compared with price to earnings. But if the Fed keeps feeding money, history is not a useful guide, is it? The Fed has never done intervention on this scale before, so the forces of the market are different now. Maybe the Fed can keep the rally going for a long, long time. Maybe it has no real choice. Interest rates have to stay low, or we cant pay interest on the debt. So I say all in on the rocket ride, dont worry about the O-rings.