Back in the heady days of 1999, when the Biz-media was occasionally truthful & transparent, I used to be invited on TV to talk about current market events. One of my favorite places to go was the old Bloomberg building on Park Avenue because they had the best snacks.
One day in late 1999 I made an appearance when the Nasdaq was up multitudinous points. It was the greatest Bull market in history yet it went against every fundamental and technical indicator and analysis conceived of to that date.
Being the young hotshot that I was, my analysis was simple; “Set aside everything you think you know and ‘date’ almost any Internet-frenzy technology stock you are able to afford. Date them because they are fun and satisfying and wildly profitable. But don’t, under any circumstances, marry them. Any of them. Because one day reality will matter.”
The market conditions went against everything I knew, yet I was forced to participate in order to make money for clients, keep up with performance and stay relevant. It was the epitome of adapting to the changing market condition and it worked for a period of time.
But right after that interview I made my way to the snack bar to take a few things with me back to the office, and who came sprinting up? Bloomberg himself. Realize this was way before he was His Honor, the Mayor.
He didn’t look at me, just began furiously dishing some fresh fruit into his plate and muttering just loud enough for me to hear; “Those fuckers think they are doing something, accomplishing something. Those fucking assholes think they are creating value. Then he raised his voice and said THEY AREN’T CREATING SHIT! THEY ARE GONNA DESTROY THE MARKETS! Then he spun his heels and walked away.
He was, of course, absolutely correct.
Today the situation is similar. Not exactly alike, but similar. Back then the markets had innovation in both technology and Wall Street coming together to bring about a significant increase in value. It was carried very far, until it broke, spectacularly.
Now the market is powering higher without a pause. But there is no value being created as far as I can see. There is simply a giant plan to pump as many dollars, Euros, Yen, etc. into public markets as possible in order to cover up the reality of overwhelming debt and deflation. Throw good money after bad in order to make the bad money good.
Policy-makers three-pronged goals are; 1. to keep asset prices levitated in order to propagate the “Wealth Effect that will encourage spending and hiring 2. To fund the governments Treasury issuance to cover deficit spending and 3. To help banks liquefy by buying their non-performing assets and investments. We are now in year four of this plan and most of it is working. This has been the most successful government program since the Marshall Plan right after we won WWII.
Knowing the policy and plan and thinking that it is, “The Royal Scam”, as I’ve been known to call it, doesn’t mean that I’m bearish or I’ve missed it. Many have adapted to the changing market condition even though it is a patently manipulated one. I don’t know how or when it will end but as you know, the policy is clear, free money goes a long way to fixing almost all financial problems.
There is no value being created except for shareholders and the government. And as the Fed Chairman says, it is all just transitory. Just like in the past.
I beg you to “get it while you can” and enjoy the fun and festivities. I won’t even begin to speculate on when and how it breaks. But reality eventually wins.