Submitted by Mark St. Cyr [5],
An issue that has been debated more times across the financial media than the main stream media’s fixation on some celebrities bottom has been about “missing out” or “getting in” since the so-called “generational bottom” of 2009.
What has been lost on so many of the nascent “just buy the dips” crowd is they have been systematically rewarded as to forgo any objective analysis on why this market keeps rising; and like Pavlov’s dogs they’ve been rewarded every-time they’ve answered the opening bell.
Getting in to buy every dip fueled with free and easy money to spend via the Federal Reserve has taken little skill or expertise. However, who is going to be there to buy what you’re holding; when you want out? Especially in any unexpected downdraft.
That is the only fundamental issue that still seems to have true relevancy in this 5 year bizarro world we now define as “the market.”
Call them Shorts, Bears, whatever, but the one moniker that doesn’t fit properly yet is applied universally so is: wrong.
Bears have been wrong: but they’ve been wrong for all the right reasons.
Yes, they have been wrong as in calling the direction of this market. But is this truly a “market” any longer since it’s now singularly based on interventionist policies never before witnessed in its history?
Yet this latest moniker has been allowed to be affixed with such permanency it would make a bottle of Superglue™ blush. Personally I wear it as a badge of honor.
To show just how far we have come in looking at true fundamental, objective analysis, consider the following:
If Billy Paintmiester goes to the local store and purchases a paint by number set, then puts it up for sale where it’s purchased for $1,000,000.00. Then does it again, and again, and again. What would one think?
Of course Billy’s paintings would now be the rage throughout the media as “Genius” or “Picasso-esque” and more. You would have a cacophony of art critics and more heralding his brilliance on the use of his brush along with critiquing every other minute detail as to keep the story alive.
Yet, as a few dig deeper it’s revealed “the bids are only coming from one buyer” however, they are refuted and branded as critics jealous of having missed out on this nouveau craze of painting by the numbers.
The refuted critics are continuously sneered, jeered, and finger wagged as every new painting sold is held up as “proof” they didn’t know what they are talking about for: “it’s different this time.”
Then suddenly everyone realizes that “one buyer” can’t be explained away. The one bidder is found out to be Billy’s rich uncle and without his influence: there is no “paint by the numbers market.”
This is where I believe we are in respects to today’s market highs. At some point true fundamentals of market forces will come back into play. And the fundamental that may be missing currently is the most important as well as overlooked by today’s just buy the dip crowd: Who will they sell to when they need to get out?
Since former chairman Ben Bernanke’s famous (some will say infamous) Jackson Hole speech where he announced in no uncertain terms the Federal Reserve will supply the funding (via QE) as long as the economy’s picture is made up by certain numbers contained within lines the “Fed” deems correct. The market picture has been hailed as a work of art worthy to be placed in museums where scholarly work and interpretations will be bestowed for all times.
Yes these numbers or colors are within defined lines as to make something which resembles a picture of economic recovery, but what you don’t have is something resembling a picture worth looking at: Let alone one worth buying.
There’s no true true economic recovery picture to be bought. The only artistry on display here has been of the BS variety. And most serious business people are not, and have not bought it for a very long time.
People everywhere continually point at “the numbers” as concrete evidence to hang their horns on. Although if I’m not mistaken Bernie Madoff, Enron, and few others had quite spectacular numbers also. They too created great pictures staying within the lines showing a picture only Wall Street could love. Till they didn’t.
However, what’s again the real issue with the markets at these heights is that little unsettling, as well as under reported fact that Shorts (as well as even the contrarian play trader) has been decimated, discouraged, and for many even bankrupted when trying to play the fundamental elements of supply and demand contained within free markets. For the Fed. has proven it will use its own bazooka to protect this so-called art gallery from being exposed as the paint by numbers fraud that it is.
We are now at heights where even the so-called “Uber Bulls” are beginning to get a little nervous in the hoof. For just who is going to buy when the first major dip goes stampeding past?
There are no shorts to speak of at these levels that would need to cover and buy as to close a position. The Fed. has all but eliminated them giving a possible free-falling market even more wind at its back. Market volume analysis alone should bring this fact to light for anyone who’s serious about looking into why volume is so atrocious. You have only one side now playing.
In 2010 when the market first showed signs of honest weakness you had prudent bulls that rode the 666 train from the market lows that could take profits as the euphoric killing bears would inject rational thinking back into the markets by tamping down unicorn and rainbow exuberance. The Federal Reserve has completely thrown that market dynamic out the window – by opening their own.
The dirty little secret that everyone (and I mean everyone) wants to act as if it no longer exists is: These prices are only representative of anything worth value if they can be sold.
And as of right now, just how much of a discount will be needed if suddenly someone shouts “Fire Sale!” in this crowded theater?
