The Party Is Over

Tyler Durden's picture

Submitted by Mark J. Grant, author of out of the Box,

I watched the business channels yesterday and winced. I cannot tell you how many times I heard that, "This was a great opportunity to buy." It is a great opportunity to buy I suppose if you are a masochist and enjoy people using a scalpel on your face.  Maybe if you enjoy the pain it is a "great opportunity to buy" equities but that would be about it. For the rest of you I would suggest moving quickly to cash and maybe buying some debt where the cash flows at 6.00%-8.00% overcome the price of the securities. Bonds will eventually bounce back as the flight to safety intensifies but the timing of this is quite uncertain.
 
I was also astounded with the number of people saying that the Fed didn't say anything new. These people must be living in Borneo and far out into the jungle. The Fed came out and said as clearly as any Fed has ever said; "We are going to unwind the trade." Yes, sure, there was the usual huff and puff about a change in market conditions could change our viewpoint but that is not relevant. What was relevant is that the Fed stated and quite clearly that, "The party is over."
 
At every party there are two kinds of people. There are those that want to go home and those that don't. The trouble is that the ones that don't want to leave will lose money if they do so they try and extend the entertainment.
 
Now it has been a four year celebration and the last guests might leave at midnight or 1:00 A.M. so none of us are quite sure when they will stumble out but the host has made the announcement. Now it is time for everyone to get ready to go home. The latest announcement by the Fed was one hundred percent different than Bernanke's Congressional testimony and to not understand what was said will cost institutions billions of dollars and some people their jobs.
 
Yes, the biggest of American corporations have money. They did what they should have done during the process. They borrowed money very cheaply, the paid down debt, they bought back their equity and they took advantage of what the Fed had provided. Equities and bonds both rallied due to all of the liquidity. There is no other reason they rallied. None!
 
The money never made it to Main Street as exemplified by our growth rate and every asset class was buoyed and bubbled by just one single thing---lots of newly created money that had to go somewhere and so it did.
 
The markets will bounce on this day and that day and people will cheer but if you want the trend line, as necessitated by the end of the party, it is down.
 
Because we live in a global economy we will now also get impacted by China and Europe. The flow of money had protected our shores but now we will be exposed and the recession in Europe and the growth rate in China, probably around a real 3.5%-4.0%, is going to come bouncing into America. Liquidity has been the one and only god and the Fed has now told you that this god is going to close up shop.
 
It has been a great party. Enjoy the memories!

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King_of_simpletons's picture

Some people live in denial. It is a hard emotion to get over.

Fukushima Sam's picture

Yeah right, they will unwind and then the pain will get so bad that they will start winding again. That's how these inflation events always happen.

NotApplicable's picture

Question is, what's the half-life of these actions?

THX 1178's picture

I don't understand why people are so Up in arms about rising interest rates... it'll implode the TBTF banks PDQ and CEOs will be back in DC asking for QE ASAP. If they dont get the injections, its game over, if they do get the injections, its game over. I don't think this can drag out much longer, though.

Joe Sixpack's picture

They will replace Bernanke with an eager printer. Bernanke will say in his memoirs that he was a mild Volcker, but when he left the next guy did not follow his plan.

Captain Willard's picture

What Joe said, except the part about Volcker.

Volcker represented the Country to the extent that any Chairman of an intrinsically corrupt institution can. Greenspan represented Wall Street. Bernanke represented all of the Elite. The next One will represent only Obama.

Variance Doc's picture

...who is a puppet for Wall St., which is an intrinsically corrupt institution....

Joe Sixpack's picture

My point about Volcker is only that he actually raised interest rates, and rather substantially if I might add.

smlbizman's picture

if the o'govt is going to capture pensions etc. and pay annuitys, which i know we will get there, ....because you are to stupid to run your own finances. ask them......would you want to crash the market to achieve this?  create the crisis, provide the hope enact the solution...

unwashedmass's picture

 

i agree. just a question of when Ben panics, Barack tosses him, and....brings in Larry Summers to finish us all off. 

DaddyO's picture

Hi my names Ben and I'm a Central Bankaholic...

Do you think these Central Bankers are going to join a 12 step program and change their ways?

Methinks not, somewhere I read that unless they can experience a complete psychic change, they are doomed to repeat their debauchery ad infinitum with death, insanity and institutional living being the only outcomes.

DaddyO

StychoKiller's picture

"Ben, Ben, why dost thou persecutest me?"

LongBalls's picture

Bernanke is just jawboning air out of the bubble prior to further money creation. How can the gov't fund it's wars and other operations without it. There is one difference between America and the majority of other nations on earth who are rioting in a deflationary enviorment. Americans still have guns and the gov. is deathly affraid of those guns. The faucet has not been shut of yet. The 2nd Amendment battle is the canary in the coal mine.

e-recep's picture

ben shalom appearing on TV with new paper promises in 5, 4, 3, 2...

Carp Flounderson's picture

You people crack me up, still preaching inflation.  Denial is a hard emotion to get over ;)  OMG the world isn't ending, what do we do now!!!

Silver Bully's picture

'Yeah right, they will unwind and then the pain will get so bad that they will start winding again.'

The rally might be over, but the printing will continue until morale (unemployment, the S&P 500, and the number of unicorn farts and rainbows) improves.

With all this spending and debt, there are only *2* options out of this mess for the Fed:

  1. print money
  2. default

That hasn't changed.

Think our commander in chief, the Fed, or any of the other drunken sailors will stop spending (I won't mention cutting spending since that is a statistical impossibility), fall on their swords, and default on the debt?

Right.

It isn't a question of if the central banks stop printing. It is a matter of how much they will print on a day to day basis.

Just because we're in a trough between tsunamis doesn't mean we're all safe and sound.

Buckle up. We haven't BEGUN to see real volatility yet.

exartizo's picture

actually... massive taxation... confiscation of physical gold and silver... and any other assets the government can get its hands on....

THEN

default.

Herd Redirection Committee's picture

Even in the 30s the gov't merely requested (or demanded) that people exchange their gold for USD.

There were no door-to-door searches by Army Rangers, as the more intellectually lazy sometimes imply.

The gov't will reneg on pensions promises, SS, Medicare, etc.  There will be bail-ins for banks, screwing depositors.  Whether the gov't seizes other pensions, I don't know.  But thats the low hanging fruit, not gold.

NotApplicable's picture

Like the denial that refuses to acknowledge that the Fed (and fedgov) is trapped?

If the trap is to be sprung, it will be in order to install global governance. IMO, there's a bit of war coming before that option is viable.

Shaktipalooza's picture

how ironic that i'm reading this article in borneo, in the jungle (mulu national park). some documentary people from the bbc are sitting next to me talking shop . time for another tiger .

DeadFred's picture

Tigers are not allowed on ZH, only bears.

GMadScientist's picture

Wolves (bond vigilantes), vultures (private equity), and two-headed snakes (sell-side)?

Joe Sixpack's picture

Snakes eating swallowing themselves from the tail, back to the head.

Yancey Ward's picture

I made a New Year's resolution to stop living in denial, but then I thought to myself that I don't ever live in denial, so I discarded the idea.

BraveSirRobin's picture

And when denial floods, even more people live it.

Mister Ponzi's picture

Exactly. Western central banks have now been providing cheap money to the system for 25 years. They opened the monetary spigot every time there were any problems in the economies or the financial systems. The 1987 crash, the various currency crises of the 1990s, LTCM, 9/11 etc. etc. From a longer term perspective, it would be best to end this madness now but given the history of central bank decisions I somehow doubt it that suddenly sanity rules.

nasdaq99's picture

Normally i agree with everything you say but we now live in a world of sociopathic bankers where they lie every day because the robots react to lies just as much as truths.  Berdonkey will hand off the baton in 6 months and the next one up will print more...........faster........longer.......until things totally collapse.

saveUSsavers's picture

not so fast! We just lowered mortgage down from 20 to 10% ! Yea, I know that's FIFTY PERCENT. Party on.

GetZeeGold's picture

 

 

Here's some aspirin.....unless you feel like throwing up first.

Skateboarder's picture

The only drink served was Smirnoff Ice.

asscannon101's picture

I'd kill for a Zima right about now.

Professorlocknload's picture

Rumors of the party ending are greatly exaggerated. Another keg is on the way.

bnbdnb's picture

What kind of party has no volatility? Thats a lame ass party.

francis_sawyer's picture

The puke & vomit smells will linger for awhile [our 'college days' got us accustomed to that]... So we got that going for us!...

Spastica Rex's picture

Back from the day when sweaty mens danced angrily at one another. Two snaps up!

francis_sawyer's picture

How come ur always such a fussy young man?... Don't want no Captain Crunch don't want no Raisin Bran...

~~~

http://www.youtube.com/watch?v=ZcJjMnHoIBI

Spastica Rex's picture

REALLY fun!

I reckon... you know a lot about... cyberspace? You ever come across anything... like time travel?

TJ00's picture

We need Weird Al to do a ZH anthem, maybe even a musical version of Cramers meltdown

http://www.youtube.com/watch?v=SWksEJQEYVU