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Dow 20k Faces Economic Reality and VIX

On a cliff

Dow 20,000. Man has finally overcome gravity. What would we do without speed of light trading algorithms and "infinity" interventions by global central banks?

Is it possible that stock prices will soon face economic reality? I know, this stock bubble top can be stalled "forever" like the global bond bubble. Oh wait?

Dow hits all-time high, cracks 20,000 for the first time ever, USA Today, Jan 25 '17

Global Bonds Suffer Worst Monthly Meltdown As $1.7 Trillion Lost, Bloomberg, Nov 30 '16

Here are just a few reasons Dow 20,000 has moved us even closer to the edge.

• Warnings of a slowdown in the fall materialized again today as we close out the last Friday in January. 2016 was the eighth year of the slowest "recovery" since WWII.

IMF Slashes US GDP Growth Outlook: Now Sees US Growing Only 1.6% in 2016, Zero Hedge, 10/4/16

U.S. Economic Malaise Hits 11 Year: GDP Growth 1.6% in 2016, Investor's Business Daily, 1/27/17

  • Dow 20,000 and US National Debt At 20,000. The US National debt stood at $9.042 trillion when the Dow hit its 2007 top of 14,198 on October 11th.  On Jan 25 '17, the Dow closed above 20,000 for the first time ever. The US National debt was $19.950 trillion. So while it has taken over 9 years to climb 6,000 points (41%) above its 2007 boom high, we have watched the US national debt more than double (120%) in this same period.

US national Debt versus Dow Industrials

  • During the first 11 months of 2016, Chinese moved $762 billion abroad. Effective January 1st, the Chinese government has made it much harder to move funds out of the nation. Citizens must now pledge that the money leaving China will not be used to buy foreign property, securities, life insurance or investment-type insurance.  The impact of these changes has already been felt from London to California to Australia.

China's Army of Global Homebuyers Is Suddenly Short on Cash, Bloomberg, Jan 26 '17

Conventional investing does not consider strategy changes due to booms and busts, yet the comments below are those of the central bankers bank, the Bank of International Settlements in Switzerland. Interesting to see the group (central bankers) responsible for flooding debt across the globe since 2008 warning us of the huge costs from these boom/bust cycles.

"The hypothesis we have explored, and taken further this year, is that the current predicament in no small measure reflects the failure to come to grips with huge costly financial booms and busts ("financial cycles"). These have left long-lasting economic scars and complicated the return to normality." - 86th Annual Report of the Bank of International Settlement, June 2016

Server Racks

Even the numbers pouring into high frequency trading programs produced a very rare warning this week. For anyone who understands the math showing up in the "crush the VIX, rally stocks" total distortion of "free markets", this is a must watch.

 


Join The Investor's Mind as we continue thinking outside the conventional box as we come over the top of the third major financial bubble since the 1990s. Click here to learn more.

 

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