Investors all over the world are confronted by markets that have been dressed up for the amusement of the crew in charge of the ship, and nobody seems to recognize what they are looking at. Sure, they look like markets, but at the same time there is an unfamiliarity that is extremely unnerving to at least a few in the gathering crowd. The majority of the mob, however, have decided that they look enough like markets to charge in blindly in the expectation that all will be as it should. Things are not as they should be. Far from it.
Everywhere one looks are signs that the markets are just monkeys dressed up in fancy costumes...
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From benign inflation, housing's recovery, improved unemployment, and sustainable profitability; Grant Williams destroys the myths of the disturbing disconnects between these "headlines" and the facts in his must-read letter...
Countries all seem far rosier when viewed through the prism of stock market performance and government bond prices than when examined realistically by means of a long, hard look at the underlying economies — particularly if the necessary adjustment is made to account for the extraordinary level of stimulus applied by all and sundry.
Which provides the perfect segue...
Raoul Pal and Remi Tetot of Global Macro Investor (one of, if not the, very best macro publications available anywhere) put this chart together for their most recent monthly and kindly gave me permission to use it.
It is without question the single best chart I've seen to explain the reality of all-time highs on the S&P 500 in relation to the application of trillions of stimulus dollars. This chart obviously applies solely to the USA, but no doubt we would find a similar pattern in just about all the major, QE-riddled markets.
The chart shows the S&P 500 deflated by QE — and it's breathtaking:
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There's your all-time-high stock market, folks.
Just another primate dolled up like a sailor, I'm afraid.
Don't follow the crowd and dive into markets just because everybody else is doing so.
That's how monkeys end up getting hanged.
Full Letter below...