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"The Stock Market Is Too Important To Leave To The Vagaries Of An Actual Market"
Submitted by Babar Rafique of Setter Capital,
As equity markets have become increasingly critical to the global financial and economic system, we're actively subverting them into meaninglessness.
Equity markets are efficient, rational, and accurately reflect the value of assets, we're told. Sure, there might be bouts of euphoria or panicked selling, but those are short-term anomalies in an otherwise rational system.
The simplicity of this idea is undeniably appealing -- if we can trust in markets to broadly be an efficient allocator of value and accurately representative of short-term economic potential, then we can use it for a range of economic decision-making. An investor who wants exposure to a particular country can buy ETFs linked to that country's stock market(s), for example, with the confidence that the investment outcome will bear a meaningful relationship with that of the economy invested in.
This requires, of course, that the price numbers on global stock indices mean something. The trouble is, to an increasing degree, they mean nothing at all. And we are busy creating more meaningless stock markets precisely because we need the ticker numbers to be more and more meaningful.
The equity market is a leading indicator for an economy, we're told, and from TV talking-heads to academics to wealth managers, we all conduct ourselves as if that's the case. A rising stock market thus means that confidence is improving and economic performance should shortly be rising as well. By that measure, the US economy should be doing fantastically well, matching or at least meaningfully correlated with the eye-popping performance of its major stock indices since 2008. Unfortunately, that's just not the case -- labour force participation remains appallingly low, wages remain depressed with lackluster wage growth, more and more wealth has become concentrated at the very top of the income scale, etc. In reality, while US markets have galloped ahead, the actual economy has been sleepwalking since the 'Great Recession'.
This begs the question then -- if US markets don't meaningfully reflect the American economy, what do they reflect? To an increasing degree, they represent the fact and perception of central bank intervention into the markets. All major US indices share a meaningful correlation with the capital flows of the Fed's successive QE programs, and speculation on the Fed's future actions as communicated in various Fed meetings and press announcements move the markets in a big way. I'm certainly not saying that the Fed is all that matters for the US markets, but the market does listen to the Fed a lot more then it should and it sure seems like the Fed listens back. It's worth noting here that the Fed's dual mandate is to promote maximum employment and price stability, not manage market expectations -- theoretically, they shouldn't directly impact stock markets in the short term at all.
The story is much the same in the other major financial centres of the world, where the numbers on the big boards seem to be less and less meaningful as well. Broad European indices have been reaching for the heavens -- after the ECB has reintroduced us to the pleasures of ZIRP and NIRP and launched a massive QE program of its own. Japanese intervention into their equity markets went even further, with the Bank of Japan directly buying ETFs to help keep the Nikkei going in the right direction.
The Chinese take the cake here though, with their level of intervention into their equity markets made abundantly transparent after the recent popping of the Shanghai SSE Composite Index bubble. After more conventional tools failed to stem the tide of panicked selling, the authorities deemed selling to be unpatriotic, halted trading in about half of the market, ordered companies to buy their own shares and generally made it clear that there was a preferred direction for the stock market to be moving in. Going against that direction would have you risk a lot more then what any definition of a halfway efficient market would suggest.
What has brought global equity markets to the point of becoming increasingly decoupled from their respective economies? I think it's our need to have stock and stock index prices be meaningful that ultimately has driven the shift towards meaninglessness. From a top-down perspective, an example here is that politicians point to the stock market as proof of what a good job they're doing in managing the economy and in some countries even derive their legitimacy from the continued performance of the local stock markets. Also, hundreds of millions of investors of all sizes have invested in stock markets through all sorts of financial instruments and stand to lose heavily in a market crash -- that didn't go over too well the last time around and we're still struggling to recover.
From a bottom-up perspective, an example is company boards that partially link executive compensation to the performance of the company's stock (which usually will have a positive correlation with the overall stock market). As a sidenote, Roger Martin, ex-Dean of Rotman School of Management (where I'm currently a student) has written extensively about this kind of executive compensation being problematic for the integrity of the markets as well -- although he may not see it as a small symptom of a much larger threat to market integrity, as I do.
The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system.
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International Banksters must be destroyed
I do wonder what will happen when Greece leaves the Euro and defaults on everything. I hope Deutsche gets fucked. Like proper fucked.
Yes, the market is too important for it to be left to market forces. Agreed.
*brain explodes*
I feel much better now. A little light headed, but I'm sure its a temporary sensation, or something I will get used to.
yeah......best headline today for sure.......heheheheheheeh
Not just the stock market. Everything is just too important now for truth and freedom to exist.
This Article is spot on. Given the mandate of The Fed, why on earth does it need a massive trading floor in NY, backed up by another in Chicago? Why does it need to be a major client of Citadel? Why does it get trading discounts for volume on CME?
And if we are to have a system of FREE MARKET capitalism, in addition why do we have an ESF?
It will only have any chance of reform with the next collapse but, even then, the chances of REAL reform are very slim because the same people will make the same decisions again out of self and vested interests.
The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system.
Welcome to 1984. Has there ever been anything more Orwellian? We have to destroy it to save it? Around the world everything is officially rigged. It is hard to wrap my mind around how these people running things think.
Think.. The Joker meets Patrick Bateman meets Rachel Dolezal meets (Your favorite sociopath)... you get the idea. Basically David Rockefeller
"Deutsche" has been, is and will be, fully backed by the US FED dollar.
The US tax payer will continue to pay for "Deutsche"' until the dollar is the dinar...
destroy the bankers, why? just trade alongside them and make money. oh right, you woud rather be poor and bitch.
and don't lie and tell me about your huge stockpile of gold you have been collecting for 30 years.
The stock market is just too important to leave to the vagaries of an actual market now
Levitating the stock market has been happening in the land of the free since at least 2009. Fraud and manipulation is the fastest way to wealth.
It's getter harder for the propaganda to work when more and more people are going under and the systems like utilities are becoming less stable. The thing that'll likely start the collapse are things like race baiting the free shit army and destroying the working and middle class lifestyle. There are a lot of people who are giving up, but there are also a lot of people starting to get really pissed and it won't be a big thing but a little thing that starts the avalanche....
http://showrealhist.com
Q: What is going on?
A: F__k the people!
yes to 2009. and longer if you consider the discounting effect of ever lower rates that has been happening for decades. but the real damage to the micro structures of the market has happened since 2011/2012. single name stocks stopped effectively discounting information in 2012 (except for discounting that there was a lot of QE happening, with the hope of more to come, that all got discounted properly, of course). nowadays, very, very rarely do you see a stock actually trade off when it becomes obvious its management/model is flawed (maybe you get a -5% move for a situation that should have been a -25% move). aside from the obvious misallocation issues, this is a generation crime: it is forcing younger investors to bailout the boomers by paying 2-3x the fair price for their own retirement assets.
OT:
Poor Kruggers:
http://krugman.blogs.nytimes.com/2015/07/15/angry-germans/?module=BlogPo...
hehe - first time I've voluntarily read anything on the NY Times site since - oh, I don't even know how many years.
But I must admit that article was kinda fun, short & sweet.
From the article:
<<Because criticizing a nation’s economic ideology is just like declaring its people subhuman.>>
I wonder if he realises what he just said, there?
Thanks for that little snack. I guess you're one of those who reads the NY Times so I don't have to. One of the almost-never times I have any sympathy for a Krugman whine. Krugman's hit his stopped-clock correctness quota with this one.
ETA: First the IMF, now the NY Times. Looks to me like Someone Up There is seizing this opportunity to put Germany firmly in its place. Hmmm... wonder what else is happening behind the scenes, to cause this sudden anti-German sentiment from TPTB? I suspect that whatever it is, it has very little to do with Greece.
It was inevitable, to the extent it has not always been like this. Whatever must be manipulated, will be manipulated. Lies are their stock in trade. It is their basis for control. Put every kind of lie out there and the truth is lost. It is called Non Linear disinformation. It is their system. http://www.thetruthaboutthelaw.com/non-linear-disinformation-makes-it-im...
They should call it the stock window now. We can exchange shares for whatever TPTB want to give us.
This article articulates well why looking at TA and charts has become a waste of time.
Is TA a waste of time? No - in a free market, it is invaluable.
A rigged market is nothing but propaganda, and therefore looking at any analysis of those 'charts' simply glorifies it.
<<The stock market is just too important to leave to the vagaries of an actual market now. Too much depends on good-looking numbers now. It must be guided and controlled, or else the stilts on which our global financial system balances become shakier and more visible. The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system.>>
Orwell could not have said it better. Propaganda makes a more relevant study for the 'market' today, than does economics, mathematics, or probability.
This is why Metastock and Omnitrader are sending advertisements at a frenzy. If the market only goes up, no one need TA anymore, and their business is dying.
The public be suckered
FOREVER!
http://showrealhist.com/yTRIAL.html
Well, if a bank or banks are considering accepting stocks as collateral, then yeah, it wouldn't be wise to leave their valuation to an actual market.
Once the money-changers got hold of the press it wasn't more than 2 years and before they connected infinite fiat directly into the stock markets. They are like pedophiles. They won't stop until they are locked up.
Yeah yeah yeah, just BTFD and shut it!!!
Until the current "financial system" fails, we will have a managed stock market. Just like the Chinese and everyone else.
Why ? If they stopped it would lose 50% or more until it found fair value.
Interestingly, more and more inside the establishment see central bank stock market management as the proper course.
"And you may ask yourself, how did I get here ?"
And you may tell yourself, this is not my beautiful house! Same as it ever was.
It's not that hard to understand. The stawk "market" is a policy tool. The illusion of prosperity must be maintained even if the whole country is slowly going to shit right before our own eyes.
So let's see, stock prices are too important to be left to real market forces, interest rates are too important to be allowed at any number but zero, deposits are too important to allow withdrawals, and democracy is far too important to be left to the people. Why have I been so slow to catch on?
B-caws you are thinking clearly and logically. Didn't you miss your dose of daily gov't happy talk?
+ MILLION....
It is all so obvious now....and sadly will not change quickly.
So true and obvious... the stock market has become perverted by the debt ridden junkies of the world led by the US gov't. Can't ever let it go down!!!!!!!!!!!!!!
So this is supposed to be capitalism? Gimme a break!
Its certainly to do with massive numbers of Boomers retiring.
If the 401ks crash, its all over.
The NeoLiberals/NeoConservatives have lost control over the markets since March 10th 2008 @ 11:00am Bear Stearns NYC time. What controls the markets, and the future of all economies throughout the World is a Mandelbrot Set, or fractal, of actual economic destruction that continues to replicate itself each and every successive business quarter. The old 'growth models' that the Wall Street 'Quants' based their projections on was seriously flawed, and now the sand they built the American Economy on has shifted much like the World Trade Centers shifted on their foundations when the USA Military Grade Nano-Thermite cut into the support steel beams to control the demolition of WTC 1 & 2, plus Building #7.
NOTE: The appropriate algorythm to control the Mandelbrot Set that was triggered in 2008 when Bear Stearns was subject to a bear run has not been utilized yet because the 'Quants' do not understand what they did on a Quantum Mechanical level. Nor do they understand how the same fractal has been replicated each successive business quarter. Until they understand what is controling the markets they will not be able to increase the growth model whatsoever. Each business quarter will be a repeat of the last with an increase in contraction until all the superstructure that was built by the 'Quants' is deconstructed and destroyed outright. In brief, the fractal replication is very aggressive, much like a runaway freight train on a Hegelian Spiral downwards.
"The market must be rendered increasingly meaningless simply because it's too meaningful to our current economic system."
A manipulated market always returns the favor in the opposite direction.
“The primacy of politics over markets must be enforced.” —Angela Merkel
US QE, EU QE,China buying and banning selling.
Looks like a disease that governments get and they are not afraid to manipulate when they think it proper.
"The Chinese take the cake here though, with their level of intervention into their equity markets made abundantly transparent after the recent popping of the Shanghai SSE Composite Index bubble."
Far from it... The fact that their bubble has popped and the U.S.'s hasn't, but in fact is the progenitor of this macro problem of central bank intervention, says all that need be said about who 'takes the cake'...
"I'm certainly not saying that the Fed is all that matters for the US markets"
You should, because it in fact, IS.
Yeah you can buy all you want but wont be allowed to sell.
The article is decent but really should take it a step further. The Federal Reserve has destroyed not ONLY the stock market and its priceless value as a price discovery mechanism but also money printing has destroyed the equilibrium mechanism within the socio-econom ic construct of a democratic Republic.
The levels of illegal immigration and racial animus by minorities would ever be accepted in a state of equilibrium as both are highly negative and destabilizing factors in the socio-economic welfare of the US (and Western Europe). The Central banks money printing temporarily mollifies the populace just enouh that they do not take to the streets.
Of course this will happen eventually and teh responsibility lies squarely at the Fed.
Fed policy = Stock and Awe !
Is it just me, or are there comments on this page capable of giving great head
ache?
All I know is the Amish are probably laughing their asses off right about now.
Now that the financial sphere has totally usurped underlying economies, rigging global financial markets is now a universal matter national security worldwide - What a complete and utter House Of Cards.
So, WE are saddled with massively inefficient markets that allocate money to the least deserving and least productive and THEY are saddled with the knowledge that vast numbers of people, not on the inside, now know that the they and those they serve control things ... and when there is the next crisis (and there will be some day) that EVERYONE will quickly know who is responsible (just as the Chinese knew who to blame... and the Greek people know who to blame).
They cannot escape this responsibility and the consequences of that rsponsibility.