Bank of America's Forecast Of When The Fed Will Crash The Market

Tyler Durden's picture

Earlier today we reported that Bank of America's chief strategist Michael Harnett made two stunning  (if perfectly obvious) revelations for a person, who stands to potentially lose his job if he dares to publicize the truth, which is precisely what he did when he said that i) "central banks have  exacerbated inequality via Wall St inflation & Main St deflation" and ii) it is "no longer politically acceptable to stoke Wall St bubble; two ways to cure inequality... you can make the poor richer...or you can make the rich poorer...they have failed to boost wage expectations,inflation expectation, “animal spirits” on Main St... so Fed/ECB now tightening to make Wall St poorer"

Some further observations from Harnett's note "No market for Rich Men":

Tightening by Fed, rhetorical tightening by ECB has succeeded in raising bond yields, volatility, reducing tech stocks (CCMP, QNET, SOX all at 1-month lows); flow data had indicated tech very overbought (Chart 2– flows into tech annualizing 22% AUM YTD)...

 

 

... ripe for correction; EM debt & US/EU corporate bonds other crowded areas...look at surge in inflows to EU credit funds (Chart 3).

 

In other words, having failed at its task of "making the poor richer", the Fed is now resigned to the upcoming market crash which will make the rich poorer instead.

And here is the clearest signal yet that central banks are about to pull the trapdoor: "central banks in aggregate still printing: bought $350bn in April, $300bn in May, <$100bn in June…big 5 central banks buying less but not yet selling."

He continues:

Central banks want volatility to return, know financial conditions too easy (Chart 5); yields rise as they carry through on threat (or as ECB shows this week, lose credibility by lame flip-flop on policy intentions as Euro moved toward ECB “pain threshold” - Chart 7); ECB sets interest rate floor and floor now rising.

 

 

Central banks making mistake tightening policy as there is no inflation. Disruption, Demographics, Debt (IIF just announced global debt hit all-time high of $217tn = 327% of global GDP in Q1, up $50tn past decade)...all means normal business upturn cannot create inflation...oil prices poster child for this (we cut oil price forecasts today)...all means the big inflation rotation awaits radical fiscal stimulus, trade war, major increase in geopolitical risk, Occupy Silicon Valley policies (tech taxation, living wages...).

The question then, of course, is when will the Fed crash markets? Here is Hartnett's take:

We don’t think this is “big top” in stocks;  greed harder to kill than fear; don’t think this “big top” in stocks, would be surprised if bull market which began with SPX 666 ends before 6666 on the Nasdaq... summer 2017 = significant inflection point in central bank liquidity trade…will likely lead to “Humpty-Dumpty” big fall in market in autumn, in our view.

 

But Big Top likely occurs when Peak Liquidity meets Peak Profits. We think that's an autumn not summer story.

So roughly just under 500 more points on the Nasdaq before the "big fall."

Finally, some ideas on how to trade it.

Asset allocators should nonetheless start buying vol, reducing exposure to credit, prepare for bout of higher yields...

 

Summer trade arguably optionality in tech (uber growth), long banks/energy (uber value), lighten up in credit, EM, add to volatility.

 

Investors anticipating a full reversal of the QE trade would thus position as follows...

  • Long oil, short stocks
  • Long 2-year Treasuries, short EM debt
  • Long TIPS, short HY
  • Long resources, short tech
  • Long utilities/telco, short consumer discretionary
  • Long value, short growth
  • Long Japan & European periphery, short US
  • Long inflation, short deflation

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Ahmeexnal's picture

BTFD! SIX-SIX-SIX

Erek's picture

"Free beer tomorrow"!

realmoney2015's picture

Only a select few know when the market will be intentionally crashed. And we aren't one of them. To be on the safe side protect your wealth and buying power with gold and silver. 

Help educate your stubborn loved ones with candles with silver coin prizes: https://www.etsy.com/shop/ScentSavers

And enter to win 5 free ones here: http://www.markyesenia.com/scentsavers

The market will crash and all Fiat currencies all eventually reach their true value...0

BandGap's picture

They moved the date up from Valentine's Day 2018.

If I tell you how to position yourself for a crash in a "market" and you move your money that way, doesn't that contribute to a crash in the "market"? Just wondering.

Pull.The.Fucking.Pin.

espirit's picture

Did Uncle Warren approve this message?

playit's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobproplan.com

realmoney2015's picture

Is the pin you are referring to the Fed?

If so, pull isn't the word I would use

Iconoclast421's picture

NO. They take your money and use it to pump the market even higher.

LawsofPhysics's picture

Correct, this article is complete garbage.  fuck BofA, they are another dead bank walking.  Anyone else remember them transfering all their CDS to the FDIC-insured part of the balance sheet?

 

The SOCIALIZATION OF PRIVATE LOSSES CONTINUES!!!

Fuck em, such "let the majority eat cake" monetary experiments have been tried before.  Of course, never on a global scale, like today.

Ghost of PartysOver's picture

Not like I used too that's for sure.  At some point this thing will implode.  The Fed has created a monster with QE from which there is no escape.  They are boxed in.  What the outcome of this cluster f%^& is I do not pretend to know.  ,I no longer throw caution to the wind and throw the Full Monty at BTFD.   Monty does not want to be butchered.

realmoney2015's picture

Yes. It will implode. It's all a guessing game as to when. Im surprised it has made it this long. Let's hope it's replaced with a sound money system based on true free markets

any_mouse's picture

The same owners will be in charge after "the crash".

Any crash will only negatively impact non-owners who count their worth in fiat terms.

Think of a casino where every patron loses it all at the same time.

The House always wins.

DownWithYogaPants's picture

I think it is we peons who are boxed in.  As for the masters of the universe P.C.B.s they are not boxed in.  Whatever comes they will say "we feel your pain" and motor on Ruthlessly.

veritas semper vinces's picture

These fuckers dont even try anymore to pretent they are not SATANISTS.

Bryan's picture

No, being obedient, servile Leftists, they'll wait until mid terms come up in 2018.

lake's picture

If you have oil heat, this may be the time to add another tank and fill up.

lake's picture

And add a wood stove and a lot of wood. Redundent redundency. Just in case.

TheSilentMajority's picture

Hmmm...

Economic/investing advice from a former bankrupt?

No thanks.

wisehiney's picture

Bullshit.

And tough shit.

You weasels ain't gonna stop me from reloading on TLT.

Keep trying.

buzzsaw99's picture

define "crash". i wish to mock you later.

Fake Trump's picture

A crash is just like an ejaculation. 

CRM114's picture

cum again? How so?

 

 

;)

smacker's picture

In which case ban viagra and keep the under 30s out of the markets ;-)  and everything will be alright (!)

farmboy's picture

Our Quant department defines it as a 2,1333 % drawdown on a rainy day.

Yen Cross's picture

 Ask that shape shifting lizard Warren Buffett. He'll be like fly on shit, buying warrants with free fed $'s.

 That fucking scumbag needs a serious dirt nap.

Bill of Rights's picture

So we have Valentines day 2018 ( Taking bets )

And we have Autumn 2017 ( taking bets )

 

Crypto-World-Order's picture

Neither day will happen (taking bets)

smacker's picture

Yes, also entirely possible. But wouldn't it depend on whether action was taken to completely prevent it or the two predictions are just wrong over timing?

Crypto-World-Order's picture

Every prediction has been wrong so far.

smacker's picture

Generally true, but it's usually the ((timing)) that's wrong, not the event.

buzzsaw99's picture

there will probably be a buyable dip (-1%) the day after the aramco ipo.

smacker's picture

It could be a two-part crash. Not unusual.

LawsofPhysics's picture

Make "the rich poorer"....  What the fuck are they talking about? TARP/TALF and the ONGOING ZIRP/NIRP continue to make the rich richer!!!!

The Fed has and continues to facilitate the greatest TRANSFER OF REAL ASSETS and REAL WEALTH to a SELECT FEW PEOPLE/CORPORATIONS!!!!!

 

 

Fuck BofA, THEY SHOULD HAVE GONE BELLY UP LONG AGO!!!!

Lebronn Jakens's picture

They are right but the thing is that theyt they should be out of business.  They are a bunch of scammers of the worse kind. 

smacker's picture

Article: "[...] summer 2017 = significant inflection point in central bank liquidity trade…will likely lead to “Humpty-Dumpty” big fall in market in autumn, in our view."

So we're back to BAU; markets crash and unprecedented heavy storms occur in autumn, usually October. I wonder what we're talking about by ((big fall))?

JBilyj's picture

What I like about this article that I'd like to see more of on Zerohedge? The trade recommendations at the bottom of the article...

Lebronn Jakens's picture

This is old news   The speculation as to when it will happen is beyond ridiculous.  There is one anailylyst that I know of who is actually calling the market moves in stocks gold and oil.  The thing I can't figure is why Shepwave can get the market moves correct and the other jokers keep spewing this crap. 

flapdoodle's picture

Which comes first, WWIII or the market crash (now taking bets)?

Fantasy Free Economics's picture

Suppose I am right in that Fed policy has never been anything other than a political agenda on behalf of the deep state? If that is the case the goal may be to buy up the capital portaion of the factors of production.

http://quillian.net/blog/

Is that not the optimum goal? Control land with war and labor with propaganda, then use uneared money to buy control of capital. Wouldn't it make sense that central banks give up pretense and just buy stock, to save the world, of course?

James Quillian

Fantasy Free Economics

walküre's picture

whatever Trump will tweet on the morning after the crash, will be most entertaining

farmboy's picture

I do not understand why this briljant guy wlll tip us off on the exact number for the big crash. BOA is the lucky bagholder of Country Wide financial.

They have a lot of problems on their own but please keep dancing until the crash will hit you in the face.

No More Bubbles's picture

Who cares what "the market" does. Irrelevant distraction.

"They" have already crashed the entire world economy. Just keep watching....

Batman11's picture

Blow the bubble, burst the bubble.

Japan 1989

The Asian Crisis

The Euro-zone crisis

Richard Werner’s “Princes of the Yen” tells the story of how Milton Freidman's "shock therapy" is being applied to the developed world through independent Central Banks.

https://www.youtube.com/watch?v=p5Ac7ap_MAY

Batman11's picture

Global low interest rates ...... check

Global debt saturation ........ check

Goldman vulture funds ready ....... check

Normalise and prepare for bankster take over.

Batman11's picture

If the American people ever allow private banks to control the issue of their  currency, first by inflation, then by deflation, the banks…will deprive the people of  all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson

The plan went global.

Fundies's picture

What bullshit.....the rich will do just fine. 

Too-Big-to-Bail's picture

I would say the market 'can' crash, but let's all just continue to kick the 'can' and buy the f*cking dip