Is the Difference Now Permanent?

From the Slope of Hope: I will start off with a chart that, in a sea of tens of thousands of charts, stood out as shocking:


What the chart represents is the percentage drop from whatever the record high was. In other words, it shows the percentage loss a person would have had if they had bought at the highest point in the history of the market.

What stunned me about the chart was how for nearly half a decade stocks have been absolutely "pinned" to the top. There was a tiny dip in late 2015, but since that time, there hasn't been a single drop in the market of even 5%, and even those tiny 1% and 2% drops have been utterly healed.

In other words, hell on earth for an equity bear. Absolute. Living. Hell.

Of course, equity bulls are doing fine, and those who didn't trade the market prior to 2012 must figure this is the easiest thing in the known universe. Indeed, they probably feel like geniuses. Because all you do is deposit some money, pick a few random stocks, and voila, you have more money than before.

Why should anybody even bother working, with such easy money out there?

Of course, those of us who study markets for a living know that there's a pretty simple reason for this unidirectional "market" of ours......


Hell, it even applies right down to the individual stocks!

So the question I ponder with increasing frequency now - - and it's a question whose potential answer chills me to the bone - - is this: what if it really is different this time? And, more important, what if this difference is permanent?

What if, in the relatively brief history of public equity markets, it simply took this much progress in technology, central bank knowledge, and economic scholarship to finally figure out how to completely control the market without serious price inflation?

What if, as recent history shows, equities will merely increase in price in perpetuity? They might not move that swiftly, but they will, more or less, become more valuable, with a sprinkling of tiny drops here and there to make sure people don't go completely hog wild.

Let's think of this from a different angle: as you probably know, the market for diamonds is tightly controlled. De Beers has mastered the art of the cartel. If diamonds were simply in a huge global open market, with price discovery fully allowed, there is no doubt prices would be far lower (albeit more volatile), because they actually are NOT that rare or precious.

As it is, though, De Beers has balanced massive marketing ("a diamond is forever"........."how can you make two months' salary last forever?") with artificially-controlled supply to yield a market with pretty much zero volatility and a steadily increasing price.

Maybe the chart above is the future of stocks. I really don't know.

But do you notice there's no active public market for buying and selling diamond as a commodity? And that there aren't any technical analysts for diamond charts? Or that there's no national network devoted to news related to diamonds? It's because all of that stuff would be drop-dead boring, because prices are controlled, and predictable, and not worthy of examination. Someone figured out how to control the market. And thus the "market" no longer exists.

God help us chartists especially...........if this is the new world order for equities.


runnymede Anarchyteez Sun, 09/17/2017 - 01:53 Permalink

You will be right--it's just unknown when. The PPT is an ad hoc creation that has been successful up to this point.The criminal ponzi operators have lots of tools left at their disposal. As a historian, I watch with a bemused horror the unfolding of catastophic events that repeat, despite ever more clever attempts by pretentious humans to game nature. The only difference I can see this go-around is that very clever people have more and better organized manipulation tools than ever before, creating an illusion of control by both the insiders and the guy on the street. The current fad is called algorithms. But they're momentum and sentiment algos. Fundamentals are so 20th century. The only thing that holds the house of cards up is sentiment. As long as folks believe, it's self-fulfilling, until the laws of physics come a-callin'. As you note, there is no market. Only emotions. Eventually you run out of mountain to build the dam higher. Until it's real it's not real. Like an earthquake. The forces are at work out of sight way below the surface until the moment they overcome the resistance. And no one wants to believe he's the fool; so he believes---until the earth actually moves beneath his feet."God--what a gullible breed"      Agent KNo one knows what's going to happen 15 minutes from now, let alone 5 yrs. If markets were real, you'd be in fat city. Who knows; it can turn on a dime----when sentiment shifts.

In reply to by Anarchyteez

johnjkiii runnymede Sun, 09/17/2017 - 05:43 Permalink

Agreed. The markets have always been the subect (object) of manipulation and the algos, run by the CBs etc. have todays advantage. History also shows that they only reluctantly lose their grip and it takes a while for sentiment to shift enough to change the trend. Once that happens, we know the SHTF and the unaware panic. Always happens. We have methods to measure momentum, sentiment etc and can detect changes. Why not use them and enjoy the ride while keeping a close eye on the data? What has happened will happen again in a slightly different form than in previous episodes but fear is fear and it is palpable in the market data. Use it. You may not be out at the top but do the math limiting your drawdown to 10% and getting back in at 10% off the bottom to see how well you do.

In reply to by runnymede

fx johnjkiii Sun, 09/17/2017 - 06:16 Permalink

I really don't understand why people want to fight the central banks when they decide about how and where to invest their own hard-earned money. Yes, central banks ought to be abolished, let me be clear, but let's not kid ourselves, it's not gonna happen anytime soon. So we will have to live with them for now.They have crossed the rubicon long ago and are hell-bent to prop up equity and bond markets, no matter what. Anyone who wants to fight them by going short equities, is behaving like a sado-masochist. If you can't beat them, join them (for now)! Yes, go longg stocks and have a mental trailing stop 12-17 % below the most recent all time high. If stocks drop further than that, you can be sure that something has changed. So that's your maximum risk. Compare that to the risk of being net short - it's basically unlimited, in reality of course "only" a couple hundred percent. Have you ever looked at the stock charts of high inflation countries like Turkey in the 1980s/1990s or brazil nowadays, in local currency terms? they keep rising and offered by far the best inflation protection to a domestic investor. Even better than gold bullion. Now, the CBs are hell-bent on inflating government debts down, if not away. For that purpose, the CPI will be ever more distorted, showing low inflation while in reality, expenses for daily live rise at a multiple of what they show. The low official inflation number in turn gives them all the leeway and justification to keep rates down, do more QE etc. Probably we will get a huge crash someday, no matter what the CBs do. But what good does it do for a short, when the crash happens from Dow 60k down to Dow 20k, 10 years from now? With a trailing stop you will be out at Dow 48-50k at the latest, having more than doubled your money plus dividends. being short? you will be broke despite the crash, or at best have lost zero in nominal terms, but about 50-80% of purchasing power over 10-20 years. I may get downthumbed for that, but folks: If you are not long global equities here with a trailing stop, then the real inflation will kill the purchasing power of your liquid assets over the next 1-2 decades!

In reply to by johnjkiii

7thGenMO Sages wife Mon, 09/18/2017 - 00:22 Permalink

What has been consistently happening since the creation of The Fed is the consolidation of wealth into fewer and fewer hands.  Until The Fed is thoroughly audited, we can assume that this wealth is being stolen by the anonymous oligarchs that own The Fed.  The Fed created the conditions that forced Lehman to go bankrupt - thus consolidating assets into the oligarch owned TBTF banks and The Fed's balance sheet.  This has also facilitated manipulation/control of the once free markets through international central bank coordination, etc.  For instance, PM manipulation has been documented thoroughly here on ZH.  Of course, control of free markets requires annuling natural law to prevent true price discovery.  This ultimately becomes unsustainable - i.e., people are becoming too aware of the true economic situation.  So, the oligarchs are turning to social control facilitated by MSM propaganda, government surveillance, etc.  The end game is being played out in the streets of the USA now.  The oligarchs (who are funding both sides) don't care if the right or left wins as long as the end result is their society of control.

In reply to by Sages wife

fx Sages wife Mon, 09/18/2017 - 03:14 Permalink

I'd say lehman was a watershed moment. It was THEN (shortly therafter) when they crossed the rubicon (QE, changing accounting rules, bailing out TBTF banks etc). They are not going to allow another event like that to happen; Lehman and the 2-3 months thereafter were probably the most scaryt shit that the CBs ever experienced. They will not be willing to experience anything like that again - not without throwing every instrument at their disposal at it before, anyway. And if need be, a real war. If they one day can't prevent it anymore, then get at least a long lasting distraction and a scapegoat and a war serves both purposes perfectly.

In reply to by Sages wife

scintillator9 Sat, 09/16/2017 - 23:54 Permalink

From my perspective, this article reeks from my computer screen of one Irving Fisher and his quote of "Stock prices have reached what looks like a permanently high plateau."That was in SEPTEMBER, 1929.What the author is seeing is NOTHING new, it has happened before, and is pretty much verbatim from the 1920's playbook.

What on earth was happening? Wasn't business bad, and credit inflated, and the stock-price level dangerously high? Was the market going crazy? Suppose all these madmen who insisted on buying stocks at advancing prices tried to sell at the same moment! Canny investors, reading of the wild advance in Radio, felt much as did the forecasters of Moody's Investors Service a few days later: the practical question, they said, was "how long the opportunity to sell at the top will remain." What was actually happening was that a group of powerful speculators with fortunes made in the automobile business and in the grain markets and in the earlier days of the bull market in stocks-men like W. C. Durant and Arthur Cutten and the Fisher Brothers and John J. Raskobwere buying in unparalleled volume. They thought that business was due to come out of its doldrums. They knew that with Ford production delayed, the General Motors Corporation was likely to have a big year. They knew that the Radio Corporation had been consolidating its position and was now ready to make more money than it had ever made before, and that as scientific discovery followed discovery, the future possibilities of the biggest radio company were exciting. Automobiles and radios-these were the two most characteristic products of the decade of confident mass production, the brightest flowers of Coolidge Prosper- ity: they held a ready-made appeal to the speculative imagination. The big bull operators knew, too, that thousands of speculators had been selling stocks short in the expectation of a collapse in the market, would continue to sell short, and could be forced to repurchase if prices were driven relentlessly up. And finally, they knew their American public. It could not resist the appeal of a surging market. It had an altogether normal desire to get rich quick, and it was ready to believe anything about the golden future of American business. If stocks started upward the public would buy, no matter what the forecasters said, no matter how obscure was the business prospect. They were right. The public bought. ...........they were comforted by the recollection that every crash of the past few years had been followed by a recovery, and that every recovery had ultimately brought prices to a new high point. Two steps up, one step down, two steps up again-that was how the market went. If you sold, you had only to wait for the next crash (they came every few months) and buy in again. And there was really no reason to sell at all: you were bound to win in the end if your stock was sound. The really wise man, it appeared, was he who "bought and held on." Time and again the economists and forecasters had cried, "Wolf, wolf," and the wolf had made only the most fleeting of visits. Time and again the Reserve Board had expressed fear of inflation, and inflation had failed to bring hard times. Business in danger? Why, nonsense! Factories were running at full blast and the statistical indices registered first-class industrial health. Was there a threat of overproduction? Non- sense again! Were not business concerns committed to hand-to-mouth buying, were not commodity prices holding to reasonable levels? Where were the overloaded shelves of goods, the heavy inventories, which business analysts universally accepted as storm signals? And look at the character of the stocks which were now leading the advance! At a moment when many of the high-flyers of earlier months were losing ground, the really sensational advances were being made by the shares of such solid and conservatively managed companies as United States Steel, General Electric, and American Telephone-which were precisely those which the most cautious investor would select with an eye to the long future. Their advance, it appeared, was simply a sign that they were beginning to have a scarcity value. As General George R. Dyer of Dyer, Hudson & Company was quoted as saying in the Boston News Bureau, "Anyone who buys our highest-class rails and industrials, including the steels, coppers, and utilities, and holds them, will make a great deal of money, as these securities will gradually be taken out of the market." What the bull operators had long been saying must be true, after all. This was a new era. Prosperity was coming into full and perfect flower.

 If one were to pick up a book about that time period, and strip out the dates and people, one would be convinced that one was reading about today at times. The outcome may be different, however. I am expecting something far worse, for even very elderly, as in 100+ year old people who went THROUGH the prior depression I spoke to said that everyone is accustomed to easy living now.   

scintillator9 Sun, 09/17/2017 - 00:07 Permalink

One more thing, charts like that which show potential losses while buying at the top does not show the INDIVIDUAL disasters that people may have.Much like a number of people I know say that "the market" is up X% yet their 401K is not near as much, and they are in "aggressive" funds.There is often a disconnect from these charts vs reality. 

Gordon_Gekko Sun, 09/17/2017 - 04:35 Permalink

There was a time I remember not that long ago that any of us who mentioned "PPT" or "CB's buying stocks" or "market manipulation by gov" was loudly laughed at and derided and called a "conspiracy nutter", especially by the likes of Mr. Tim Knight here.Well, the shoe is on the other foot now and I have to say I am thouroughly enjoying every moment of it. Wait till everyone "rational" discovers how utterly manipulated PM markets are and how worthless their beloved paper currency is.  Looking forward to it.TOLD YOU MOTHERFUCKERS. TOLD YOU.

squid The Divided St… Mon, 09/18/2017 - 08:31 Permalink

Well, yes and no. My buddy and I were discussing this a few weeks back as he had a meeting with some guy who had JUST DISCOVERED THE SCAM. I think everyone on this board will recall their own personal "Light Bulb" moment when you realized that its all a Ponzi. The problem is that once your own personal bulb comes on, you think it will crash tomorrow. It doesn't. Anyhow, my buddy had a meeting with some guy whose light bulb had just come one and this guy would not shut-up about PMs, bitcoin, yadda, yadda, know the type. He was looking forward to making a fortune, and that's the problem. if you have PMs stashed away you will come out of this thing ok and you're safe. But for 99.9% of the population, it will be hell on earth and most of your immediate family is included in that 99.9%. I am not looking forward to this at all, it will be the absolute shits and humility and modesty will be best survival strategies. Bragging on how smart you are and that you're super rich now because you are smart and they are all dumb will get you a bullet between the eyes. PMs are insurance, not an investment. You don't buy fire insurance on your house and then get an eskie full of beers and sit out in front of your house in a lawn chair waiting for it to burn down. That is not how insurance works. Its better to have it and not need it, than need it and not have it....sort of like a fire extinguisher. The unfortunate reality, however, is that it looks as though a fire extinguisher is going to be required fairly soon here. And when it is, QUIETLY use you fire extinguisher, put out the fires, buy your revenue producing real-estate with the REAL MONEY you have, buy companies at 1 cent on the dollar and remain humble. It will not be a time for laughing about "I told you so" to your friends and relatives....they will realize that on their own. You don't want to be the asshole with the gold, you just want to be Joe-down-the-street. By all means, prepare but don't hope for it because it will come and it will be the absolute shits when it does. The upheaval will be enormous and ugly. There will be opportunity for those who are liquid (those with PMs) and lots of hunger and worrying for those without. Navigate accordingly. Squid

In reply to by The Divided St…

Pollygotacracker Gordon_Gekko Sun, 09/17/2017 - 11:21 Permalink

My brother (invested) and I (not invested) have nearly stopped speaking to one another over this subject. He thinks I am nuts for believing the markets have been so manipulated. I think he is crazy not to see something so obvious. I will not discuss Central Banks with him at this point. He will figure it out when it reverts to the mean. He who gets the last laugh laughs best.

In reply to by Gordon_Gekko

gdpetti GreatUncle Sun, 09/17/2017 - 14:21 Permalink

Perfect con job.... short for 'confidence'... it all works as long as they can keep the con going... which is dependent upon keeping the propaganda going, thus their hatred of the Russian media like RT/Sputnik... out there tellling the truth... which is a killer for any liar. Thus the need to contain it and get rid of them, so that our govt can keep the game going... keep the lie going.Permanent? No... at most, they have a decade before Mother Nature swing on it... no more... no specific data as the concept of 'time' is variable, especially at the next level of this game... backwards, forwards, etc.. this dimension, that dimension... all subject to your focused perception, 'as you choose to see it'... as Einstein figured out with his unreleased UFT... all variable.... that's the next level of this 'game'... and this NWO won't need our OWO gameboard... the rules change as the entire EM field transitions to the new 'game', 'level', dimension.So, the question is when those puppet masters in the SG want to 'pull the rug'? They feed off of chaos, thus our foreign policy makes sense as long as you understand their objective... for their NWO is based in negative energy... chaos, war, death, rape and pillage... So, they want as much of this as possible leading into this curtain call.. down with the OWO, up with the NWO.... can they maintain control or will they lose control by the end?  That is their goal.. all of this central bank BS is just the playing the game, manipulating the markets, the masses, etc.... to keep control of the game as it moves into the final pages of the script.... they will want to pull that rug and create as much negative energy as possible before Mother Nature swings on it and the game changes to the new one.Not if, but when... and how. They have wanted to get WW3 started along with this.... like trying to start a fight in a crowded bar... all the psychopaths serve as tools, most aren't aware of it... which is better that way, as they are the same as the rest of the puppets... expendable. Once the people have no more blood to be squeezed out of them, then they rug will be pulled... basic economics....  What these charts are showing us, is that this time it is different... as this time, the entire game will end, not just the end of a simple cycle of economics, history, civilization.. but the end of a cosmic cycle.. the Grand Cycle... much longer, much, much more important.... thus the changing EM field in the planet, which is going, with or without us.... ready or not, here it comes.

In reply to by GreatUncle

squid Sun, 09/17/2017 - 21:48 Permalink

Hmmm...... is it permenant?Maybe, but probably not and I will tell you why.I went to university in the eighties and it was a given that the USSR would be around for my entire lifetime. It was a GIVEN you understand and if you had the temerity to point out that societies do not natually live in the way like the Soviets wanted people to live, you were laughed out of the room, and yet, in the long run, you would have been right. The more the Central banks believe that they have this thing licked, the more likely it is that it will all crash into a heap. When? Dunno, but prices will revert to the mean. There wil be a back lash against central banks who print money out of thin air and buy stocks (Swiss, I mean you), bonds (ECB I mean you) and any thing in sight (Japan, I mean you). This will fall on its ass, of that I can assure you. Squid

razorthin Sun, 09/17/2017 - 23:15 Permalink

If this is, "the mother of all bubbles", as many smart men believe, then this must also be the mother of all blow-off tops.  Duration is directly related to magnitude.  You've never lived through anthing of this proportion, so be patient.

assistedliving Sun, 09/17/2017 - 23:30 Permalink

feel like geniuses or not, they've been right, i've been ZH wrong, they're richer and I'm the poorer for it.  Prob is my millenial 'genius' son is knee deep in BTC, me in PM's and he's been laffing at me hurts man, hurts...until it doesn't 

rex-lacrymarum Tue, 09/19/2017 - 08:28 Permalink

The mere fact that we see such a post from a seasoned trader and market observer is to my mind proof that we are very close to a denouement that will make the history books.