• 6 mins China Imposes Widespread Lockdowns As Delta Virus Spreads Rapidly
  • 9 hours 3 of the Most Interesting New ETF Themes of 2021
  • 1 day Mid-Term Bitcoin Outlook Remains Murky
  • 3 days Big Business’ New COVID Initiative: No Jab, No Job
  • 5 days The Most Interesting Stocks Of Earnings Season, For Better or Worse
  • 7 days Chinese Stocks Rebound After Regulatory Scare
  • 9 days Apple Stocks Falls After Blowout Earnings Report
  • 9 days The 5 Biggest IPO Disasters Of 2021
  • 10 days Crypto-Based ‘Shadow Financial Market’ Spooks Regulators
  • 13 days Ireland Balks At Biden’s Global Tax Plan
  • 16 days Robinhood To Trade On Nasdaq Targeting $32B Valuation
  • 20 days Facial Recognition Is Watching You
  • 21 days Biden’s $3.5T ‘Human Infrastructure’ Workaround
  • 21 days The Fed’s $3 Trillion Headache
  • 24 days Why Bitcoin Could Struggle To Recover After Epic Crash
  • 24 days Wells Fargo Back In The Spotlight Over Personal Loan Cancellations
  • 25 days Delta Variant Real Threat To Economic Recovery
  • 28 days JEDI Drama Continues With Microsoft Contract Cut
  • 30 days DiDi Shares Take a Beating From Chinese Regulators
  • 31 days Thousands Of Companies Hit In Latest Ransomware Attack
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

The Misleading Comfort of Calm

Have the headlines below given investors a sense of continuing peace, rest, and optimism regarding their financial futures?

IMF slashes world growth forecast again, CNBC, April 12 '16
G7: Global Growth an Urgent Priority, Al Jazeera, May 27 '16
'Act Now or Risk Another Deep Downturn', OECD Warns, Yahoo Finance, June 1 '16
World Seeing Greatest Monetary Policy Experiment in History - Rothschild, RT, Aug 17 '16
Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost, Bloomberg, Nov 30 '16
Strong Dollar Drags US Growth At Slowest Pace Since 2011, The Guardian, Jan 27 '17
China Reserves Edge Below $3 Trillion as Yuan Pressure Increases, Bloomberg, Feb 7 '17

Clearly the answer is no. Then is public optimism a good guide for future stock prices?

US Consumer Confidence Jumps To a 13 Year High, Business Insider, Dec 23 '16

As an American, I can understand the optimism over having a pro business President coming into the White House.

However, he or any world leader is still starting 2017 after 8 years of the greatest assistance by the state (i.e. central banks) on record. Every world leader saw sovereign bonds across the world began their decline in prices (rise in yields) from three century lows last summer.

Without trillions added to global debt levels and speed of light computer trading programs that close their day at neutral, the image of "never decline" stocks would have cracked long ago.

The problem with depending on a central bankers' assisted bubble, is that it defies the laws of science, the history of bubbles, and human behavior. We expect this image of "calm and controlled" to go on without interruption. Yet this idea is irrational when considering the most complex system in our world.

Benoit Mandelbrot

"From 1986 to 2003, the dollar traced a long, bumpy descent against the Japanese yen. But nearly half that decline occurred on just ten out of those 4,695 trading days. Put another way, 46 percent of the damage to dollar investors happened on 0.21 percent of the days. Similar statistics apply in other markets. In the 1980s, fully 40 percent of the positive returns from the Standard & Poor's 500 Index came during ten days - about 0.5 percent of the time." - The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward (2004) Dr. Benoit Mandelbrot, pg 234

Stock markets have rewarded complacency since early 2016. Ignoring headlines on rising risk, debt levels, rates, and slowing growth has been seen as "wise".

Yet the fingers of instability in this mammoth financial sandpile grow longer and more in number with each passing all time high headline.

The lessons of previous bubbles will come home to roost again unless history has no value, and the laws of science are altered.

Combined Assets of the 10 Largest Central Banks

Daily Dow Industrials Chart

Daily TNX Chart

This is not a time for complacency. It is the worst time to trust a "centrally planned" market.

The time to think outside the conventional box is now. Don't wait for central bankers to tell you when to sell.

 


Click here to test drive The Investor's Mind while we still float at Dow 20,000. See how computers and markets are presenting very rare data to contrarians looking for cracks in the "no risk here" bubble and seeking rewards for standing outside the herd in the period ahead.

 

Back to homepage

Leave a comment

Leave a comment