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Don't Be Fooled By The Level Of The Stock Market
Submitted by Bryce Coward via Gavekal Capital blog,
We’ve had some run in stocks over the last several weeks. With today’s rally US stocks are now nearly 13% above their late-August low and are in spitting distance of another all-time high.
This would be great news if only other asset classes and the internal leadership of the stock market confirmed the seemingly outright bullish behavior in the headline level of the stock indexes. Instead, what we have seen since that important August low in stocks is:
- Global bond yields at a similar level of lower than in August
- The most cyclically inclined commodity prices (copper and lumber) basically at the same level as in August
- Late cycle stocks (Materials, Energy and Industrials, the ones that should be outperforming handsomely six years into the cycle) still obviously struggling
- Growth counter cyclical stocks (Staples and Health Care) just a hare off of their cycle high
This combination has us wondering about what we view as possibly the single most important deflationary/inflationary variable in financial markets at this moment. Namely, that China is “fixed” and on a more sustainable growth trajectory and not just in the middle of a cyclical pause before growth starts to crater lower again, as it must.
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cyclicals, counter cyclicals, lmao
It is a giant short squeeze as ZH has pointed out many times. Once the squeeze ends, watch out below!
The US stock market is levitated by desperate and relentless buying by the Fed. The wealth effect from the stock market sustains the US economy and the trillion dollar a year military and security budget.
If the US stock market falls to realistic values, the US will not recover for decades.
Forward- to more fraud
Jim Grant was on Bloomberg TV today just blowing the minds of the anchors challenging ZIRP.
Jim Grant is as sharp as a scalpel - razor like mind and with a dry sense of humour, he's brilliant.
DavidC
Thanks for the heads up. As usual Grant is awesome IMHO. I like his comment - the Fed suppression of interest rates since 2008 is itself a reaction to the socialization of Mortgage risk (that famously blew up). So basically Financial Central planning has been famously failing since 2002 or so... But on the other hand it has been very successful in blowing up the latest financial bubble. His other comments about comparing accounting to certain other famous professions was also new (to me at least) and spot on. All three snips on Bloomberg.com are worth the search.
Again ... Mark - to - Unicorn * makes all things possible
* since 2009
in terms of reserve currency that should be "since 1971"...
We all know that trade is the only thing that keeps us from going to war in earnest. We are 30+ years into a trade imbalance due to the FRN decoupling from reality. The choices are;
1) Europe and all the EM market economies magically recover.
2) The dollar is devalued proportional to that trade imbalance.
3) World war.
I think history is pretty clear on where we are heading.
Overcapacity in container shipping means years of heavy losses
http://shipandbunker.com/news/world/252633-drewry-box-markets-are-in-an-over-capacity-crisis-next-year-will-be-worse
Damon Vrabel
''Controlling others and living off their backs by forcing them to borrow with interest in order to have any money is called usury. It is a system that ensures everything we do, whether in the public or private sector, feeds Wall Street and the controllers above it. It creates a two-tiered societal pyramid of money pushers on top vs. money users on bottom. The power differential is huge. Everyone is hostage. In doing something as simple as buying food to survive, we contribute to usury because we only have usury-based money, not real money.
http://economicedge.blogspot.nl/2010/05/damon-vrabel-coming-crash-usury-...
The market has not discounted any of the hundreds of bad economic news headlines that have been announced over the past several years (today's initial jobless claims rise for one!). Until it does, it's overpriced and risk is tilted to the downside.
No, China is not fixed and neither is the U.S. Like the stawk market, they both are broken.
China got their printer fixed.
China may or may not be 'fixed', but my guess is they have a fix (Au) of a slightly different nature, waiting in the wings that will be employed at some juncture. What that bodes for the U.S. is yet to be determined, but I don't think it means roses.