This is a brilliant piece of propaganda. Central Planners are trying with all their might to force people into behaviors and financial assets that are in direct contrast to their logic as well as long term financial well being. This is the height of immorality, not to mention hubris. In the end, there is no chance of any of this working as the reality on the ground will overwhelm all of the manipulations and lies of the corrupt oligarch class.
From the Washington Post/Bloomberg article “Almost All of Wall Street Got 2012 Wrong as Markets Saved World”:
Blankfein was more prescient. “I tend to be a little more positive than what I’m hearing from other people,” the 58-year- old CEO told Bloomberg Television in an April 25 interview at Goldman Sachs’s New York headquarters. “One of the big risks that people have to contemplate is that things go right.”
Well of course Mr. Blankfein was optimistic. He knows he has the Treasury Department and the Federal Reserve in his back pocket and they will do whatever he says with one phone call. Furthermore, if things go wrong you just get a bailout. Crony Capitalism 101. That’s how the World’s 100 Richest People Got $241 Billion Richer in 2012.
Stocks rose as Federal Reserve decisions to keep benchmark interest rates at record lows while buying more than $80 billion a month of mortgages and Treasuries boosted confidence in the economy.
“In general they’re trained to analyze the economic data, balance sheets and so on. They’re not trained to predict political decisions. These factors have ruled the lives of fund managers in a more significant manner than what used to be over the past 20 or 30 years.” Read More
Michael Lewis’ scathing, aphoristic, uber-sarcastic style need no introduction. As such we will leave this brief clip from Slate, in which The Big Short author is asked how to avoid a new financial crisis, without much commentary (the answer is that under the current status quo system it is impossible to guarantee no more financial collapses, even if Glass-Steagall were to be unwound, but that is the topic for another story), suffice to point out the punchline: “future generations will wonder, “How did you not notice 24-year-olds were being paid $2 million a year who clearly didn’t know anything?” That pretty much sums it up right there.
There is one major problem with putting houses of card back together – they tend to fall…over and over. And while abundant liquidity in May and June served as an artificial prop to return European core and PIIGS spreads to previous levels merely as mean reversion algos took holds, the second time around won’t be as lucky. CDR’s Tim Backshall was on the Strategy Session today, discussing the key trends in sovereign products over the past few months, noting the declining liquidity in both sovereign cash and derivative exposure (we will refresh on the DTCC sovereign data later after its weekly Tuesday update). Yet the most interesting observation by Backshall is the declining halflife of risk-on episodes, which much like the SNB’s (now declining) interventions, are having less of an impact on the market, as ever worsening fundamentals can only be swept under the carpet for so long before they really start stinking up the place, and indeed, as Tim points out at 5:30 into the interview, even the IMF now realizes that soon the eventual second domino will fall, and it is better the be prepared (via the previously discussed infinitely expanded credit line), than to have to scramble in the last minute as was necessary in May. In other words, the storm clouds are gathering and only fools will invest in risk asset without getting some additional clarity on what is happening in Europe. The bottom line as Backshall asks is: “do they default now or default later.” And that pretty much sums it up. Buy stocks at your own peril.
Incidentally all this is happening as we read in an exclusive Bloomberg piece that “four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt” and that EuroStat still has not received the required disclosure about just how fake (or real) the Greek debt situation truly is. When one steps back and ponders just how bad (and unknown) the situation in Europe is, and that stocks are unchanged for the year, one must conclude, as Dylan Grice does every week, that the lunatics have truly taken over the asylum.