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An Inflection Point For Keynesian Parlor Tricks
Suddenly everywhere you look, one after another, a story is making its way into the main stream press (albeit a trickle but that’s a tidal wave in comparison) that we may be, in fact; experiencing a “bubble” in stock prices. All I can say is the line made famous by Jim Nabors as Gomer Pyle, “Well surprise – surrrr-prise!” But there’s a whole lot more going on here and it too is bubbling up more and more for all to see.
The once magic trick performed by the Federal Reserve via QE is turning from a one time grand spectacle of illusion used to levitate the markets; and is quickly being laid bare and exposed for its street corner value of tricks. That fact is becoming unavoidable. Even those who still believe in unicorns and rainbows (cue CNBC™) are finding it harder and harder to hold onto the magic. Anyone with just a smidgen of common sense knows what’s being presented as “a miracle of economic intervention” has been nothing more than a grand escapade only made possible through the use of monetary smoke and mirrors.
Everyone now knows how the tricks are being done. And those who continue espousing that this market is based on “fundamentals” as well as “fairly priced” (cue the media’s next in-rotation “everything is awesome” fund manager) are being hard pressed to control the snickering if not out right fits of laughter by others as they continue trying to make their case. e.g., “This past earnings season was a bona-fide beat!”
In reality we all know its only been possible through the use of extraordinary record stock buy backs made possible by a ZIRP, along with such an adulteration of GAAP via Non-GAAP: it’s a wonder why they even need calculators any more. These numbers (in my opinion) have more in common with illusion and magical thinking than anything based in reality – so why even bother. Be honest, just go for it, and declare, “We’re making all this shit up!” because: it just isn’t fooling anyone anymore.
Now the real issue from here for both the Fed. as well as Keynesians everywhere will be in trying to maintain some form, as in: “illusion of control” going forward. Surely there’s more magical thinking and sleight of hand needed now more than ever to keep up this grand deceptive appearance or “wealth effect” we were all told we’d be experiencing by now. After all, unemployment just hit 5.5% and the markets are at record levels. “Where’s the pony?”
Who needs an economy based on fundamental monetary principles when you can report economic numbers like this? Unless you’re one of the over 92 million souls unable to find work. The Keynesian answer to this? You just apply today’s version of Keynesian economic math and principles to any statistic that gets in the way of the illusion. Then “poof” just like magic, another irritating issue to the “everything is awesome” narrative is gone. No cape required for that one.
Yet the Fed. Board of magic seemed to have an issue with the illusion of “control” as it faltered a bit on Friday. Having more in common with an assistant dropping the magician’s hat: and the rabbit falling out comatose in front of all the children seated in the front rows.
Earlier during the week it seemed as if the next stage of theater was set for the captive audience. The “audience” that is demanding ever “Moar” stimulus as to continue the illusion seemed to get just what they demanded when with a wave of the wand “patient” magically morphed into “data dependent” right before our eyes. And the timing seemed so serendipitous. (that is if you believe in magic) For right on cue the Atlanta Federal Reserve released a report showing GDP expectations on par with what’s left behind in a magician’s hat after a round of pulling pigeons. It was nasty to say the least.
Personally I found the timing of this switch in verbiage having more in common with a street corner game of 3-card Monty than anything resembling meaningful economic policy. I mean; wasn’t it just “uncanny” how all of a sudden, out of nowhere, just when you thought the Fed. was facing the need to act (e.g. raise interest rates sooner rather than later per the “patient” meme) GDP expectations mystically went from “everything is awesome” to dismal with the Atlanta Fed. posting expectations of 1.2%! Thereby signalling the need of later (probably much later) rather than sooner interest rate adjustment to match the new “data dependent” meme. Once again I found myself thinking, “Well surprise, surrrprise!” What a coincidence of timing. It’s like – magic!
Just like a Vegas show at precisely the right moment the magician comes out and diverts attention just enough to make you think you didn’t see (or read, or hear) what you just saw. Within the same week its announced you’re “data dependent” and suddenly before you can blink an eye all that great data; is now terrible if not down right frightful. But, don’t be scared, it’s only necessary to help with the act. For remember, it’s all just good clean magic. However, this trick has gotten old – and doesn’t fool anyone any longer.
Just what we’ll get from here as in “the next trick” is anyone’s guess. But simple sleight of hand parlor tricks such as “free money” for stock buy backs have now but all been used up. For proof just look at the now swollen debt balance sheets of these miracle earnings beat corporations. And with the sudden emergence of Fed. forecasts proclaiming a crumbling in GDP expectations when everyone in the “everything is awesome” camp has been touting Shangri-La was just around the next earning corner, their going to have a harder, and harder time convincing themselves the fallacy will come true. Let alone share holders. But magic is all about belief right?
Suddenly on Friday it seems there’s a real issue for efficacy with the tools of magic used for the Keynesian sleight of hand. The “data” now exposes – and is ruining the illusion, rather than helping to facilitate the tricks. Instead of making a rabbit appear or disappear from a hat; the stage is suddenly getting overrun with not only rabbits, but pigeons and more. And they’re dropping their mess everywhere simultaneously. You can see the equivalent by looking at any chart showing current economic output.
Friday’s jobs report was: a true spectacle to behold. Smashing expectations for both an increase in jobs as well as a sizable decrease in the unemployment rate. So much so it’s now reached its nearest point of the Fed.’s statistical “full employment” since the crisis began. (don’t laugh just remember it’s a magic show) And with that the markets seemed to take that “good news” as frighteningly terrible – and sold off never looking back in a near 300 point sustained sell off. How can this much good be so bad for the markets you say? Easy.
A posted monthly Jobs Report showing the unemployment rate at 5.5% trumps a forecast for a possible dismal GDP report out of one branch or Fed. bank. The unemployment rate holds the magicians feet far closer to the stage lights having to raise interest rates sooner, rather than later. And it become obvious to the audience (i.e., Wall Street) this magic act may in fact becoming – old hat. And one could hear the chant for “More tomatoes!” growing louder, and louder as the trading screens were getting lambasted with more, and more red as the day wore on.
Friday saw a sell-off in the markets that for all intents and purposes was unlike many we’ve seen over the past few years. In a world where previous market data had been corrupted to mean “bad was good, and worse was better.” Good data is now more inline – with catastrophic. And any bad data mixed in might mean: even worse. Why?
Well the magicians have declared that not only will QE not be resumed (at least as of today) but the messaging for the raising of interest rates now has more in common with the Tower of Babel than it does with anything resembling a clarification of intent from the Ivory towers of the Federal Reserve. The messaging is more muddled than ever.
Without QE the markets have shown they are struggling. However this time what’s worse is: they’re all struggling at record heights. And now with the threat of interest rates rising back onto the table with such a stunning Jobs report, just when the Fed. showed they would use what ever bag of tricks or sleeve movements to push the issue back out of plain sight. (e.g. patient is replaced by data dependent) the curtain was lifted, the lights came on, and the assistant (the BLS) tripped handing the magician the knife blade first. And the once captive audience to the magical display of illusion began panicking and throwing a tantrum. (as in a near 300 point sell off after their latest communique)
Just how far has the ability to mesmerize the markets with Keynesian styled parlor tricks gone of the rails? In my opinion it’s beginning to have more in common both in results, as well as frequency: as an oil tanked laden train. The issue here is: this one is coming down from the top of the mountains, loaded to the gills with bubbled cargo, coupled together with a line of rail cars filled with financial derivatives at near infinitum – with no engineer, no brakeman, and no more track. I bet even Casey Jones is looking down thinking “Dang!”
The metrics showing how well the economy is doing have plummeted. The U.S. Dollar which by all accounts for the Fed.’s interventionist policies should at the very least be lower (much lower) and is screaming higher to heights not seen in decades. Bonds are being pushed higher and higher causing the very thing the Fed. wants desperately to raise by its own volition i.e., interest rates – ever lower. And now with other central banks around the globe unleashing their own QE or threatening (as in China) everything, and I do mean everything that wasn’t supposed to happen – is happening – both in frequency, as well as velocity. All of which is diametrically adverse as to what the Fed. has signaled shouldn’t happen. Funny thing that “omnipotence” illusion, no?
One now has to wonder exactly what will we see next coming from the Fed. as well as Keynesians everywhere. Will there be a sudden emergence of monetary policy onto the world stage in the form of a David Copperfield? Or are we going to get the newest extended version of a Sorcerers Apprentice?
By the looks of the pigeon stains accumulating it might be more of the latter than the former. But just remember, close your eyes and repeat after me: “It’s only magic. What could possibly go wrong?”
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Annnnnnnnnd it's gone.
The carnage of everyone trying to exit thru a narrow window of time will be a sight to behold. A dearth of buyers will provide some spectacular fireworks. Gotta get more popcorn.
And this is not even the Yellen/Clinton breakfast report, you know, things we can't talk about during the day.
Trading the market successfully is hard......
Good to see you again, Rocky...Hadn't heard from you in awhile.
Oh, but I've been watching you folks. Keeping tabs you might say.
They will trapes out "better than expected" meme next quarter. Any bets on 2.0 or better? Jawboners gotta jawbone, it's all they have.
Oh, to see the look in a hundred million collective eyes, when they realize the light at the end of the tunnel is an oncoming train
a hundred million? i want to see 4 pairs: the horror in those of bernanke, krugman, and yellen, and the vindication in those of ron paul.
also sorry had to do it, "they're" not "their"
As long as the Fed can print and remain the reserve currency, the stock market will never go down. At least not until the whole thing implodes. Even other Central banks around the world are investing in US stocks.
...print and remain the reserve currency...
One of these precludes the other over time. Both cannot be maintained indefinitely. Timing is a fool's game.
Timing is everything. You could buy at the wrong time in the right neighborhood but lose your shirt because you couldn't wait for prices to rise. The next guy after you gets the prize.
No leverage + physical gold/silver = remaining liquid far far longer than the markets remain irrational
When Mr Magoo (aka Greenspan) thinks it's a bubble, it probably isnt. So why the sudden emergence of bubble stories?
"You saw what Lord Voldemort WANTED you to see..."
Fucking Keynesians. I'm tired of them pouring Into this country, taking jobs from americans, and not learning to speak the language. Go back to Keynesiastan!
LoL , those fuckers
Fed to Ecomony: "Ok, sit still this is for your own good"...inserts herion needle
A card table, shoebox, three shells , and pea; is all it takes to set up a Central Banking franchise. A monkey and accordion player is not included under franchise terms & conditions.
It “has been nothing more than a grand escapade only made possible thru the use of monetary smoke and mirrors.”
Granted. But it is also much more than “a grand escapade”. What we are witnessing, or struggling thru, are final stages of a plan to utterly destroy America that began prior to the Treaty of Peace of 1783.
An early warning, not the first, came from the London Times,
“If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.” -- The London Times responding to Lincoln's Greenback notes
The policy to “return America to obedience” originated before the Treaty of Peace of 1783, which only ended the land war in North America: it continued the war on the high seas against her former obedient colonies for another 30 years.
After the Treaty, the first order of business was retaliation against the French and Louis xvi, who provided invaluable aid to American rebels. Accordingly, the English monarchy, nobility and privilege holders combined efforts with Judeo-Bolshevik (JB) money lenders and merchants to bring France to its knees.
It was only natural that Louis would give aid to Americans: he and they both aimed at identical goals: more freedom for theretofore rightless creatures. Louis began his reforms in 1771, and immediately gained the hostility of JB money lenders and merchants. For this purpose Judeo-Bolsheviks collected a horde of cutthroats and bandits from the capitals and seaports of Europe and the Mediterranean to perpetrate a mass genocide of French peasants and a few of its military class (nobility).
This genocide was deemed necessary because, owing to thousands of years of experience, JB’s learned that once a people have tasted freedom, they will never go back to slave status, at least not knowingly. The only solution, according to Judeo-Bolsheviks, is to exterminate them. So, JB tools Danton and Marat, Robspierre and company plotted to slaughter some 20 million French peasants. But the effort exhausted itself after only a million or so. This occurred during the so-called French terror of 1792-4.
With the French sufficiently punished, the English and JB’s turned their attention to America. Their plan was to use the slave issue to divide the country, drive it to civil war, and then take over when both sides became exhausted. Thus, when the Civil War broke out, the English massed 8,000 troops on the Canadian border and 6,000 on the Mexican border. Their orders were to wait for the Union to collapse and then march in.
However, Lincoln learned of these plans and appealed to leaders of Europe for aid. Alexander of Russia responded by sending a small fleet of his naval ships into the ports of San Francisco, Philadelphia and New York as a show of amity between America and Russia, and as a signal to England to back off, which it did.
After the war, Alexander sent an invoice for his services. Payment of this invoice was included in the Act of Congress that authorized funds to purchase Alaska from Russia.
Again, it was natural that Alexander would give such aid; for both he and Lincoln aimed at the same end (allegedly for Lincoln): more freedom for the oppressed.
Now, England and Judeo-Bolsheviks had a score to settle with Russia and Alexander. A pair of JB’s assassinated Alexander in 1881, and they and the English (along with JB New York bankers) financed and staffed the 1917 revolution in Russia and proceeded to perpetrate a mass slaughter of Russian peasants (some 60,000,000 to 100,000,000) and to ruin another billion or so lives.
So horribly have other nations paid for freedoms of America. (A more complete rendering of this English/JB effort to subvert America is contained in my book, ‘The American Inquisition, ed., 2’
And it raises the question, ‘What do the English and Judeo-Bolsheviks have planned for America?’
Americans have tasted freedom, of sorts, for over two hundred years. It only follows that Judeo-Bolsheviks have the same fate planned for American dissidents as they perpetrated against French and Russian peasants: a mass slaughter.
But, how will they do this slaughter?
They will use the Department of Homeland Security, which was modeled after French committees of terror (1792-4), the Judeo-Bolshevik Cheka (aka NKVD, KGB et cetera) and the Nazi Schutzstaffel.
The primary purpose of these organs of terror was to protect rule by thieves by eliminating all dissent. If the DHS is modeled after those historical instruments of terror, what possibly could be its purpose?
What a silly question.
And, what individual assassins will be entrusted to carry-out this mass slaughter?
Why did the Department of Justice (DoJ) provide military-grade weapons and ammo to Mexican drug cartels?
And, why did the DoJ, Congress, FBI, DEA and other US agencies give aid and comfort to the Red Chinese while the latter cobbled together an ALLIANCE among Mexican and Columbian drug cartels, Chinese triads, Red Chinese Army, the Chinese Communist Party and other world-class criminal organizations? I collected this data from testimony given before a Congressional Committee.
Answer above questions in reverse order and you will answer the question before it… and will arrive at the conclusion that your future may not be as rosy as you imagined.
Your bearish overtones .... are not helpful .... in a hopeful market ! Have a nice day !
Thanks for your reply.
But I must respond. It is wishful thinking, powered by the coercion of the state and central banking, that produces most of the evil in this world. Wishful thinking, you see, is based on fictions… on lies. And those who aim at evil will always pander to those who seek to live by lies… by wishful thinking; and always lead the latter to utter ruin.
I prefer reality. It is far stronger than fictions; and always prevails.
If you enlist reality on your side, you will always win. It may take many years; but, eventually you will win; and you won’t be morally corrupted in the meantime… as is the case with wishful thinking.
Clesthenes
That is some chilling shit.
Unfortuntely you are correct.
@Clesthenes, I have only read a few pages so far, but your blog is impressive. I recommend folks check it out.
I am the author at EndOfInnocence.com, which seems highly compatible with what I have read on your blog so far.
Unfortuneately, the Fiat monsters have deep pockets for Quantitative Buy Back (Mountain)!
Maybe: Bought Back Mountain I .... or .... Brought Back Mountain .... or .... Broker Back Mountain .... or .... BINGO: BROKE Back Mountain .... or .... Broke Bank Mountain .... hmmm ?
We seem to have turned the corner: it is now safe for you to return to 'shop till you drop'. The Fed has your back, their lesson was learned.
Then again people who didn't follow your "the world is gonna explode, superbearish" comments when the S&P was at 1200 have doubled their money by now (dividends included).
Even if we get a huge correction now (30-40%) they'll still be better off than having stayed out of the market for all these years.
Tell us how much you actually made after quantitative leaching ends and you have to pay the IRS on ordinary income gains.
If you're gonna brag .... back it up !
Belgetrader's dog ate the internet script reply
I know "Keynesian" is the libertarian equivalent of "racist," but actual Keynesianism advocated surpluses when the economy was good, as the MSM tells us. Now if you think the economy has been bad for years and years, Keynesianism never had a clue what to do--stimulating demand was supposed to right the ship fairly quickly.
Right. Never mind the fact that Keynesianism has consequences, the primary two being the ever-decreasing probability that a "surplus" could ever happen, and the need for ever-increasing debt to cover up previous consequences.
So your comment is silly. Keynesianism is not economics, Keynesianism is a master rationalization to justify ever-increasing authoritarnianism and ever-increasing domination of the "public sector" (as in "govermnent") by providing unlimited spending money to the predator-that-be and predator-class (especially banksters) at the expense of every honest, ethical, productive, benevolent individual.
Keynesianism is a lame rationalization for unlimited fraud, abuse, and ever-increasing domination by human predators.
So, instead of a crash .... we are having a giant .... buy back pay out float easing to infinity !
A hamster wheel of illegal aliens to suck dry and to escape back to Mexico. Nothing is free in life, wait until the illegal tax bill arrives. These fuckers will leave USA using old border crossing tactics. The money will have been already transferred into Mexico. Obama just granted 10 million grifters to steal from US taxpayers.
A good point to make here is that if these stock buybacks come to an end or slow down this is a good indicator of a major correction in the stock market like we see now already happening in some Tech companies were the insiders are selling while the company itself is still buying back stocks:
Tech insiders dumping stocks as their companies buy them back http://www.marketwatch.com/story/tech-insiders-arent-buying-what-they-are-shoveling-2015-03-06
Other points to make here are:
– S&P 500 Companies Spend Almost All Profits on Buybacks
– Stock buybacks can be blamed for lack of U.S. prosperity
– Debt levels of companies are sky rocketing
– Companies are shrinking personal and making less profit which are spend on unproductive stock buy backs, a poisoning mix for disaster further down the road
More: RECORD STOCK BUYBACKS http://forum.prisonplanet.com/index.php?topic=266463.msg1506899#msg15068...
the Dow, inflation-adjusted
http://www.showrealhist.com
Look at the national debt vs. Dow Jones index. Add some zeros. The scam is vivid to every person on this globe.
http://www.usdebtclock.org/
Get open access article feed, not breast-feeding you to spend money. Use your brain.
http://www.sciencedirect.com/science/journal/01651889
I'm not too concerned with the financial aspects of the coming "correction", I just have to suck it up and deal with it. What really concerns me is what new tactics the powers that be are going to use to continue the charade.
Will bitterly criticizing bankers and politicians become a hate crime? Sites like ZH having to go to darkweb? Will paying your bills and owing nothing become unpatriotic? Will holding precious metals be seen as sedition? These are some of the monsters from my anxiety closet.
The guy in the photo looks like Kyle Bass.