Put simply, both sales and earnings are rolling over… at a time when the S&P 500 is close to all-time highs. This is a recipe for a correction if not a crash.
At the end of the day, both China and Greece are signaling that a new round of deflation has begun in the markets. Stocks are bouncing today, but a tectonic shift has begun.
The Fed may raise rates from 0.25% to 0.3% or possible even 0.5% sometime in the next 24 months… but these moves will be largely symbolic. Here's why...
In short, the era the phony recovery narrative has come unhinged. We have no entered a cycle of actual price discovery in which financial assets fall to more accurate values. This will eventually result in a stock market crash, very likely within the next 12 months.
Remember, at the end of the day, it’s all about the big banks’ derivative exposure, NOTHING else. This is what has driven every Central Bank action since 2008. And it’s what will drive Europe’s future negotiations for a 3rd Greek Bailout.
The whole thing feels a bit like the summer of 2008 all over. Once again, the global economy is weakening, a significant crisis has erupted, and temporary solutions to said crisis are being hailed as a success.
Perhaps the most concerning is the fact that should a “systemically important” financial entity go bust, any deposits above $250,000 located therein could be converted to equity… at which point if the company’s shares, your wealth evaporates.
In short… the two biggest reasons for the markets to be rallying today (Greece and China) are simply temporary issues. They will resolve, very likely for the worse, in the coming weeks. Smart investors should be using this bounce to prepare for the next wave of the Crisis.
When you shred democracy and the central tenants of a legal system in order to benefit the very few, it’s only a matter of time before the whole system collapses.
