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The Fed Is Funneling The Investing Herd Off A Cliff
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
What happens to price in a bidless market? It goes off a cliff.
As you probably know by now, it turns out lemmings didn't voluntarily commit mass suicide: they were driven off the cliff by those in charge. Lemming Suicide Myth: Disney Film Faked Bogus Behavior.
Investors in stocks, bonds and real estate are being herded off the cliff by the Federal Reserve. The name of the game in the New Normal is to force investors large and small into risk assets. When the risk assets blow up, the herd plunges headlong over the cliff en masse.
Virtually every statistic and every public utterance by Federal Reserve spokespeople or mouthpieces is designed to persuade us of several untruths--untruths that are the essential foundation of the vested interests benefiting so mightily from the corrupt, unsustainable status quo:
1. The official statistics--unemployment, GDP, etc.--are accurate reflections of actual economic activity.
2. Risk assets (stocks, bonds and real estate) are no longer risky because "the Fed has your back."
3. Too big to fail/jail corporations are the foundation of our prosperity, so no expense will be spared to bail them out and restore corporate balance sheets and profits.
That each of these propositions is self-evidently untrue creates a massive problem for the Fed: the Fed and its minions must overcome the weight of truth with propaganda and persuasion--and if that fails, then it must strip anyone who dares leave the herd of any safe returns on their capital.
In other words--if you leave the risk-on herd, you lose any hope of low-risk returns and if you manage anyone else's money, you also lose your job.The Fed is herding the crowd with financial tasers, causing anyone who veers away from the risk-on herd financial pain.
Anyone who dares to bet against the risk-on herd and the Fed: you will be destroyed.
This mass herding of investor behavior with the rewards of pseudo-safety in risk assets and the punishments of near-zero-yields on low-risk assets has a downside: when risk assets fall out of favor--that is, when risk once again becomes visible--there are no buyers left, as everyone seeking a return was funneled into risk assets long ago.
Once you funnel everyone into risk assets and then mask the risk to generate complacency, you guarantee a bidless market when risk reappears. For six long years, the Fed has acted on the dubious faith that signaling participants that risk has vanished is the equivalent of actually eliminating risk.
In other words, by ruthlessly suppressing VXX (a popular trading measure of short-term volatility), the Fed and its cronies have generated the illusion that risk has been vanquished.
This is analogous to generating the illusion of prosperity by issuing low unemployment numbers. You haven't actually moved the needle of job creation--all you've done is create an illusion of low unemployment.
The core idea here is that sustaining the illusion of growth will cause people to borrow more money and hire more people because they mistakenly believe the economy is going gangbusters. But enterprises have fixed costs that cannot be made to go away by beliefs in a strong economy, and profits don't respond to beliefs, either.
When the herd tries to sell their risk-on assets, there won't be any buyers left except the central banks. The central banks don't actually want to own all the risk-on assets; they simply wanted to con us into buying them at nosebleed valuations, to keep the illusion going.
What happens to price in a bidless market? It goes off a cliff. When the herd wants to sell, it will find no other herd of buyers; the Fed drove everyone into one herd, and now the Fed is funneling that herd off the "there's no volatility left anywhere" cliff.
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Walt was reallly an evil PoS, wasn't he.
Oh: If you like your servitude, you can keep your servitude.
"This ship is unsinkable, right?"
"I guess we'll find out. We hit the iceberg in 2008."
Disney was always killing things.
Bambi's mom, Dumbo's mom, witches, lemmings, Pixar, Euro Disney...............
I suggest you watch "Dumbo" again.
I will.
Personally, The Disney Princesses are killing me.
Blah Blah Blah Blah
I'm Charles Hughes Smith, the type of douche who uses his middle name in ordinary conversation, and I, along with my partner, Phoenix UnCapital, have more doom porn in our now 7 year run to sell you.
"It's called Creative Destruction" - M. Eisner
Ship Captain Yellen: Iceburg's!, Smiceburg's!... Full steam ahead! How can a little solid water harm this "Invincible" (sans; convincible) ship?
Lesson: Don't drink Kool-Aid served by leaders.
But can a gambler really stop, especially if it's not his money. Losses go the the "bank" and profits into his pocket. What stops that?
stay tuned and you'll find out
My understanding is that if one (properly) chose to short this market - the individual's short position is valueless if there is no buyer on the other side. That you can be right and at the same time be f*cked over for being right. But beyond that, if this herd thing actually materializes - the TBTFs and the financial system as a whole MUST be bailed out by taxpayers because the whole world is now driven by, and completely dependent on, the financial industry. There is no choice. So one can "win" by showing the intelligence to be on the right side of the trade - but "Lose The Win" because the banksters "must win" no matter what transpires. So basically, banksters face no risk whatsoever. But they make a living by convincing "customers" of the need for hedging though derivatives while they themselves have no need for derivative protection whatsoever. Talking about 'the herd". Isn't that the most one-way herd setup imagineable? Isn't this the most un-free market scenario that could possibly exist? To create complex derivatives to ass-rape others when your sole association with them is to generate fees, bonuses and returns because you yourself don't need to truly participate since you, by nature, already own the biggest protective derivative of all - THE AMERICAN TAXPAYER?
Great point, particularly in the context of forthcoming bank bail in laws around the globe which will allow securities regulators to order the shut down of markets if they think there may be "volatility". Ya Think??
The painful truth is, that they did this to the Gold Lemmings, when they drove them off the cliff in 2012-2015.
And the sad truth part is that the natural propensity for Libertarians to want to buy gold, made them/us (myself included) totally vulnerable to Pump & Dump manipulation, rather than "Sell High, Buy Low".
TPTB on ZH will NEVER, EVER admit it (too embarrassing), but it's the Absolute Truth.
Moral: No matter what perma-Bulls, perma-Bears/Doomers and their agents, shills and trolls tell you, "Thou shall Diversify. Prudently, Wisely".
Totally off topic...
"Germany drops probe into U.S. spying on Merkel"
"Germany's top public prosecutor closed a year-long investigation into the suspected tapping of Chancellor Angela Merkel's cell phone by U.S. spies, saying there was a lack of evidence that would stand up in court."
So, what was the quid pro quo for dropping this case?
http://www.reuters.com/article/2015/06/12/us-germany-usa-merkel-bugging-idUSKBN0OS14820150612
Speaking of spying, what's our favorite "ally" up to these days . . .
http://www.wsj.com/articles/spy-virus-linked-to-israel-targeted-hotels-u...
USA Freedom Act
File sharing, possibly a federal employee data base, whatever you need frau.
https://www.congress.gov/bill/114th-congress/house-bill/2048/text
um. question. what isn't a risk asset? I'm pretty sure that stocks, bonds, money markets, ETF's, and Commodities are all a huge fucking risk right now. FU Fed. You have destroyed the economy. Good Job. Assholes.
Keep a stash of different currencies in your safe. Sleep with a .45 army colt so you can get to your shotgun. Keep several different passports.
Arable land. Water. Health. Skill in making things with one's hands. Being on good terms with extended family, so that they will show up when you need them, hopefuly well-armed. Repeating rifles .308 or larger. These are fairly risk free.
You cannot have a 1-world government w/o control over every financial transaction.
LEMMINGS
The problem for the Fed is that it's become very obvious that it is only about control. All this jibberjabber about unemployment rates and inflation targets is bullshit. Their projections are usually wrong, published data restated, promises unkept and guidance misleading. All markets are managed within a range. It may take another generation or so to get rid of it. But as the stealth (or non-stealth) inflation reduces standards of living, as the younger generation realizes that they've been sold out, as the continued slow death of the USD takes hold, as the next generation looks back at 9/11 and realizes that the puppetmasters will murder their own to accomplish their goals (with MSM aiding and abetting), and with anti-semitism rising in Europe and around the globe, these are all factors that may take another generation or so to fully take hold. I'm not sure that we have that long and, of course, there is always the US nuclear option (probably a false flag again) which could try to change / delay things.
isn't that what tpp is all about?
and in a cashless society one entity could control all transactions.
after the next crash, the Fed will have everyone switch their 401ks to "safe" treasuries
No. DURING the crash, everyone will CLAMOR to buy treasuries.
Markets would have gone bidless many times since 2008 but covert CB open market operations now provide the bid.
"The Fed Is Funneling The Investing Herd Off A Cliff"
All by design; they work for the banksters and the corporatocracy.
"Anyone who dares to bet against the risk-on herd and the Fed: you will be destroyed" Crush the responsible, the pragmatic, the savers and reward the speculators. Yes, the American FED is guilty, but all central banks are now behaving this way, so what we are really looking at is a global economic pandemic on the horizon. Rest assured, though, that the central banksters will have one of their "off sites" with the commercial bankster CEOs and with a wink and nod, give them a heads up to get short...the music is about to stop.
Zombie Nation
BTFD and get hosed!
these low flying military helicopters over my city are starting to 'freak' me out..........
Welcome to the Federal Reserve's fun house.
Where people like William Dudley and Charles Evans are constantly meddling in the markets to make it look like they want.
In the meantime William Dudley is constantly on the phone with his buddies at Goldman Sachs telling them what he's going to do beforehand.
Sounds razor
This is the major paradigm shift occuring in our society right now -- the recognition that appearance does not drive reality. We are, as a population, slowly coming to terms with this truth in all aspects of our lives. Some of us sooner than others.
Adding artificial nitrogen does not improve soil "fertility", it merely tricks plants into growing more than the supply of micronutrients really would allow them to. The long term consequence is greater plant susceptibility to disease. Which then must be addressed through the addition of more and more chemicals, each of which further degrades the complex ecosystem of the soil. The Green Revolution ends in disaster.
Adding artificial money does not improve an economy -- it merely tricks consumers into spending more than the supply of resources really would allow them to. The long term consequence is greater consumer susceptibility to scams and periodic panics, which then must be addressed through the addition of more and more legislation and bureaucratic oversight, which further degrades the complex ecosystem of the economy. The Keynesian Revolution ends in disaster.
Artificial medications do not improve bodily health -- they merely trick the body into artificial balance that is dependent on the continuous addition of chemicals in order to feel healthy enough to continue working. The long term consequence of failure to address the fundamental cause of illness is a steady cascade of increasing imbalance and failure of additional body systems, which then must be addressed by the addition of yet more pharmaceuticals, each of which further degrades the complex ecosystem of the human body. The Medical Revolution ends in disaster.
Kaitlyn Jenner is the poster child for the idea that appearance drives reality. But it is all a sham. Bruce will never be a woman, no matter how many body parts he bolts on and lops off. Just like children raised in broken homes with serial dads with poor genes will never be productive members of society, no matter how many training programs and support systems we bolt on to them. The whole idea is complete bullshit.
The chemical farming complex is parasitic, not productive. The chemical health complex is parasitic, not productive. The fake money complex is parasitic, not productive. The progressive society complex is parasitic, not productive. And the end result is collapse of society because all the pillars, all the connections to real reality, have been destroyed and have been replaced by the equivalent of paper mache.
Let us hope the pied piper leaders end their opus with an actual charge into the real ocean, because massive depopulation is the only way this is not going to end bloody once we actually come to terms with the disparity between the reality that has been spun versus the reality that actually is.
Up voted after the 2nd paragraph, nice work.
If you're wise and choose not to be in the game, you've already lost. If you're in the game and think you'll be able to time your exit before the SHTF, you have to ask yourself, what needs to happen for me to decide to sell? Do you think you'll get some kind of special sign along with TPTB or do you just feel lucky? In all likelyhood you'll go down with the ship. If you do bail out today and the farce goes on for a while yet, you lose again. Precious few will survive the collapse and only by a fluke of timing. Why do we as a collective allow the criminals to put our future and our pensions in this position?
Just stop it with all the anti-Fed talk! Why, the Fed was CREATED to protect and enrich our poor, pitiful lives. Just ask them!
THE FED IN NYC HAVE BEEN DIRECTLY BUYING UP STOCKS IN ORDER TO PREVENT A FREE FALL..
THE FED SERIOUSLY NEEDS TO BE AUDITED !
@lester1
The FED is not the only CB with skin in the game...................I don't forget all the pension fundss......................and hedge funds.........etc etc
Once you funnel everyone into risk assets and then mask the risk to generate complacency, you guarantee a bidless market when risk reappears... WRONG!
1) The fed will buy them.
2) There is no market.
Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth. [/Sherlock Holmes]
The FED does not tell people how to invest.
That is a personal decision.
Each investor weighs up Risk and Reward.
Reminds me of the movie "Weekend at Bernie's", propping up a dead guy for few days so they don't spoil the weekend party. THIS Movie is "The Decade of Benny's"... Propping up a dead financial system at the expense of our future and all the principles of capitalism.
Its working for the DSKs of the world... Party On.
It doesn't have to. All that needs to be done is for the Primary beneficiaries to find out which securities are held by Institutions which are responsible for the Insurance companies' Reserve funds (that's a really neat no tax gimmick to lower insurance companies' profits) and Pension funds.
Those holdings must be sold by a firm that needs the cash to provide for the employees that are retiring on line each year.
Nothing personal.
"When the herd tries to sell their risk-on assets, there won't be any buyers left except the central banks. The central banks don't actually want to own all the risk-on assets; they simply wanted to con us into buying them at nosebleed valuations, to keep the illusion going."
Yes, this is how it has traditionally gone.
That being said,
1. there is huge amount of effort going into promoting that there is a crash/event scheduled for the September 23rd through 28th timeframe. This is coming from more than just random crazies and the effect is building... and so people also believe they are safe until then. Heck the pope is addressing the UN on Sept. 23rd. WHY??? Jade Helm (Master the HUMAN(?) domain) will have had 3 months to position assets. This may be real or a sophisticated ruse.
2. There are several potential exit strategies:
a) implosion (as you suggest)where people are creamed and the banks use new money to buy assets and write off bad debt. This is the normal way.
b) selective default. The Fed buys up massive amounts of government and select private debt and then there is a Jubilee of sorts where the governments and selected insiders default to the Fed and the Fed just makes the debt go away. The Fed brought it into the world in a flash and can take it out of the world the same way.
c) banks continue to buy up assets at any price to get the baby-boomers through their retirement years. After which there will be much less systemic retirement liability except for government employees.
d) kill people off so that they no longer have claims on the system. Re-set with a smaller system.
e) Crash the Fed, dissolve it and then re-set with a global system (after sufficient hardship has people crying to be saved), global central bank and global money system (my theory from a few years back)
f) some combination of the above.
Nope. The recurring blurb about a bidless market is ignorant.
There will ALWAYS be a bid because the FED is ALMIGHTY. However it is done--- thru quintillions sent by e-mail to Lord Blankfeins, Jamie Dimon, or Stephen Schwartz, the bid will be there.
That's the deal that was made to keep those three from living under a box, cold, hungry, and sucking on a paper bag covered bottle of Ripple in Compton.
No worries, mate.
J B T M F D and S T M F Spike.
When the herd finds out the FED is just a bunch of two bit crooks that ALMIGHTY BS will disappear and heads will roll.
When interest rates start their assent they will try to make it appear they are raising them so as to appear in control as long as possible. This is why they're telegraphing an imminent rate increase but keep putting it off.
The sad thing is these crooks along with their enabler government have made crooks of the whole country, (world), playing their flute. Their print and play game is just about over.
I copied and pasted my comments below from the Iceland article. It's just as relevent for this article.
I am now a fully fledged journalist. All it takes is some re-gurgitation.
"Looks like Iceland has discovered the secret to economic sustainability. Hold people accountable for their actions. After it's near death experience, Iceland may have a bright future. It will not surprise me if their debt to GDP falls as low as 30% in the future. Any problem can be resolved with the right approach.
For your benefit Miss Yellen (is it Miss?), I've provided you with a definition of the word "sustainability."
"The ability to be sustained, supported, upheld, or confirmed.""
Retirees who lived off the interest on their savings have been rogered in style. Today with savings of a million Dollars the interest income will not be sufficient to live a hand to mouth existence. To have a million Dollars in savings most would have had a excellent income and good life style, with todays interest income the guy will be skirting the threshold of poverty. The guy with money in a savings account will be living on love and fresh air.
The global financial system currently looks like an Octopus with multiple arms outstretched, ready to grab you in its embrace, like it or not. On one side you have Equity markets which are booming on nothing but hot air -- economies not growing neither are corporate profits but hope being eternal. In sharp contrast we have Bond markets which from their yields are communicating a message that the global economies will not really grow for a qyarter century. How else would Bonds sell for a yield of fifty basis points.
For this dichotomy and confusion we need to thank the Central Bankers who whatever their achievements, have allowed the global financial system to become a casino, Las Vegas or Macau style. On one side there is a threat of deflation if credit contracts, matters not how many Trillion dollars are printed and injected into the system. The other side fears that if credit picks up alongside consumption, hyperinflation will make paupers of millionaires. Ordinary working folk are in a jam alongside flies and vermin. Damned if you are invested and damned if you are not.
Retirees who lived off the interest on their savings have been rogered in style. Today with savings of a million Dollars the interest income will not be sufficient to live a hand to mouth existence. To have a million Dollars in savings most would have had a excellent income and good life style, with todays interest income the guy will be skirting the threshold of poverty. The guy with money in a savings account will be living on love and fresh air.
The global financial system currently looks like an Octopus with multiple arms outstretched, ready to grab you in its embrace, like it or not. On one side you have Equity markets which are booming on nothing but hot air -- economies not growing neither are corporate profits but hope being eternal. In sharp contrast we have Bond markets which from their yields are communicating a message that the global economies will not really grow for a qyarter century. How else would Bonds sell for a yield of fifty basis points.
For this dichotomy and confusion we need to thank the Central Bankers who whatever their achievements, have allowed the global financial system to become a casino, Las Vegas or Macau style. On one side there is a threat of deflation if credit contracts, matters not how many Trillion dollars are printed and injected into the system. The other side fears that if credit picks up alongside consumption, hyperinflation will make paupers of millionaires. Ordinary working folk are in a jam alongside flies and vermin. Damned if you are invested and damned if you are not.