There have been endless discussions today about “Black Swans”. The prevailing consensus is that all of these events, as bad as they seem to be, have not effected the world’s markets. If markets don’t crash on massive negative exogenous events, is it still a Black Swan? Just asking.
There is a Bloomberg article published today that I talked about extensively during my morning show. It is entitled “All Clear Sounded as the Markets Shrugs off Multiple Black Swans”. It quotes learned and experienced investment professionals who basically say that if they don’t go down, then they gotta go up. Value-added!
These recent events would almost certainly cost the market a sustained 10% correction–and it may just in the upcoming days. But these smart magazine writers and other business media folks continue to ignore the bearded elephant in the room. It took hundreds of billions of dollars to stabilize the Japanese market. Money which was created by their Central Bank out of thin air. They have taken a page from our Uncle, and why not? Investors in domestic markets have fallen for the free money, hook, line and sinker. And the reason our market won’t dip is the same as its ever been. Regardless of the news, the Federal Reserve continues to pump fresh capital into markets, daily, and that money is hypothecated at least 10:1 and then put to work in all manner of “investments”. I used to say that only a nuclear event could end the hold that free money has over the markets. Now, only a Supernova could derail it, until it is completed.
The numbers are staggering, yet the general public knows nothing of the true nature of how this works, even two years in. With the coordinated efforts of Central Bankers and the G-7, all that fresh money stayed the latest “Black Swans” from negatively affecting the markets and ensuring that the vast majority of Americans stay clueless.
Everyone is expecting the market to crap out once QEII is finished. My guess is that it will happen shortly before or shortly after. The Chairman’s comment about a self-sustaining recovery will finally be tested then. In the meantime, just buy the dip and chase the momentum or be left on the sidelines, like most sensible risk-adverse investors.
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All I hear about is how bad QEII is, wouldn’t the end of QE actually be a good thing?
ie (input prices go down, profit margins go up, and in the meantime absolutley all personnel cut due to currently shrinking profit margins) – interesting concept, but could it work
btw – great show
sooner or later the qe cord has to be cut just to see if baby can stand up on her own or not,my question is,does the clam raise rates before or after the cut ?, or, does he raise,and use the remainder of qe 1 funds for a cushion just incase baby cant stand.
Black swans, by definition, are very rare.
What would you call a 8.9 earthquake, followed by a 10m high tsunami, followed by a nuclear meltdown?
Seriously, the clam prevail. And he’s showing the way in how to deal with these events.
Until it will stop working…
QE will not end. Not with commodity prices this high.
Some form of government stimulus will be there for a long time to come to keep things afloat. Not really growing with any significance, mind you. But just to keep things afloat.
At this point perhaps the only real black swan left would be the emergence of a system formerly known as free market capitalism.