I usually love Flag Waving holidays like Memorial Day, all full of patriotism and hope. They also usually lead to near-term stock market rallies and this one may be no different.
But there is something coming and its big and ugly.
We’ve been living with the financial facts, as they are, and the legacy of the worldwide “Credit Crisis”. But most everyone is beginning to realize, somewhat belatedly, that we cannot grow out of these problems. Money printing has been dandy but it is purely temporary and adds to the problems eventually.
As you know from my postings, the market has been under classic Distribution since April 1st and most heavily since April 17. There were double tops and negative divergences everywhere. Yet the major indices held firm. Even now, after a 100 point SPX drop, the indices are up since late December. Do they deserve to be?
Here is a news flash: Markets are broken. Real liquidity is non-existent. Banks may show a profit but they are a mess. A deflationary vortex could be right around the corner. This is what the FED has been fighting all along. They say the are inflation fighters but now they are combating deflation by using the artificial inflation of financial assets to mask reality. And its been going on for almost four years now.
Maybe I’m just another End of Days jerk who will be prove to be an idiot by the Bernanke Bid after he creates another trillion or two dollars to boost asset prices. But it sure feels like the markets are going to shed double digit percent, maybe fast and maybe soon.
If you are an institutional or professional investor, you know how to hedge risk. If you are an individual investor, you don’t have to ride it out. You can actually convert your 401k into cash at any time. Maybe you should consider something along those lines.
Sure, markets are very oversold. But that is when the downside is most dangerous.
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Let’s just wait and see what Zero Hedge has to say about that!
Me first…
It always intrigues me how long it takes for these the end of a bull to play out. Then when we’re in the teeth of the decline, everyone seems surprised that they’re losing their shirts [and pants in some cases].
Great observation!
“In the year 2000 I was banned from CNBC for saying that “they were raping stocks”.”
Priceless.
Where is this quote from?
Scott,
this pump, ramp, drop, pump, ramp, drop, will continue for some time to come. This is the benefit of the printing press and reserve currency to boot.
one thing I do find funny is the talk of death spiral of US TSY. There are many tomb stones of good managers who closed up shop trying to short the JPY TSY market.
always like your comments.
long standing prediction: 10 year 1%, 30 year 2%, mortgage 2.5% if you can get one
right on. I was thinking 2.25 on 30y paper
great post, tks!
inflation fighters,have you done any serious grocery shopping? packaging getting smaller and prices rising. and about the banks. out of the clear blue, a rogue trader surfaces with trading loses so massive it rocks the financial system to it’s core. a pattern has emerged,soc-gen, largest bank in france, rogue trader. jpm,largest bank in america,rogue trader.it amazes me,that a worldwide bank can literally rob itself,blame it on a “rogue” trader, then turn around and write off the loss. how brilliant. a way to just throw away bad paper off the balance sheets. i want a job as a rogue trader,and i promise, i can lose as much money as you tell me to.
where’s my blankey???