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I have watched the talking heads tonight on the evening news telling people not to panic and sell their equity positions. It is much the very same rhetoric we all heard before and during the 2008 crash.
Funny how none of these talking heads ever tell you when it is time to get out, instead they tell you to be brave and just face the train that is about to run you down.
Considering the FED has no ammo to fight this current crash, unless you think dropping the interest rate .25% is going to turn things around, I am at a little bit of a loss to explain what rational scenario would convince you that staying in this market is a good move for your financial future.
I have heard quite a few people say we are going to have severe deflation first. Then the federal reserve will reverse course with negative interests rates and a QE program much larger than ever before. This would catapult the market with the DOW over 20,000. People will think this is great, but remember, Zimbabwe had the best performing stock market of all time. The best performing stock market last year was Venezuela. I think you get my point.
The rationale is basically that the Feds will bail out the gamblers for the third time. Who knows. They may be crazy enough to set off a currency war to end all currency wars. Either way it's going to be very bad for billions of people who had absolutely nothing to do with creating this mess.
But the Billionaire Class and fellow gamblers don't care. They believe they are entitled to be saved no matter what. It's their birthright or something like that.
One reason that 2008 was so bad was not that sub-prime was a problem. We all knew it was, but what we didn't know was how far the rabbit hole went with that debt, credit default swaps, speculation in speculation based on nothing with roots in bad debt, etc...
The only thing I see as a potential major problem is if China, the 2nd largest world economy, has been cooking its books to look 50% better than it really is, as some articles have alleged.
One reason that 2008 was so bad was not that sub-prime was a problem. We all knew it was, but what we didn't know was how far the rabbit hole went with that debt, credit default swaps, speculation in speculation based on nothing with roots in bad debt, etc...
The only thing I see as a potential major problem is if China, the 2nd largest world economy, has been cooking its books to look 50% better than it really is, as some articles have alleged.
This has been an overall, worldwide asset Bubble. A simple contraction in P,/E multiples as well as the E itself can cause a massive contraction in the market, easily 40% as is typical in a secular Bear Market. (The transportation indeed has already contacted 30%). The Russell 2000 standing at a P/E of 110 can contact much more as the non-performing companies go under.
Ditto for all other assets. Junk bonds are undergoing a major repricing. Oil had contacted 70%. Housing values will fall again. And then there are the loss of jobs because industries such as shale oil and consumer shrink.
Of course there extent of the damage depends upon how much is real and how much has been artificially propped up everywhere by governed intervention which is no longer there - particularly China.
There only thing we know is that debt has been enormously increased everywhere with almost no growth to support it. Something has to give somewhere.
You know the Fed will inflate away the losses of the elite while killing more of the average working class. You also know that nothing you do affects the psychopaths at the Fed in any way. Their world is protected from you and they simply do not care. Until someone finds a way to get rid of central bankers expect further downgrades in your lifestyles.
You know the Fed will inflate away the losses of the elite while killing more of the average working class. You also know that nothing you do affects the psychopaths at the Fed in any way. Their world is protected from you and they simply do not care. Until someone finds a way to get rid of central bankers expect further downgrades in your lifestyles.
Yes, Central Bankers, appear to be of the type that had little concern for people. Their world exists in money and that is what they want to save - not people.
However, there are some issues facing Central Banks that does concern their personal monetary worlds, and that is the social unrest and upheaval that is happening everywhere in the world. Old regimes are literally being toppled everywhere, for Spain, Portugal, Greece, Brazil, France, Eastern European countries. High placed people in China are disappearing and the current minister of stock exchanges on China wants to resign. On top of this the whole EU is toppling as Merkel loses her grip. Let's not forget the Trump/Sanders insurgency in the U.S.
Thus, the Central Banks have to figure out how to keep their giant asset and debt Bubbles from spinning out of control and causing worldwide depressions (which already exists in some areas). Not an easy job since all they know is how to print money and that is what is calling all of the unrest and upheaval. No one wants to be at the helm when this thing goes down, which is why they may have imported Fischer from Israel to be the Vice-Chairman.
My fear is this issue is so complicated with so many moving cogs, that we wont fully understand it until after the big event has happened. Very few people saw what was going on with the housing bubble and it took a few years after to fully understand it. Its hard to point to one single cog in the picture and say "this is whats going to happen here" because that cog turns another cog which is tied into another.
There has been no significant dead cat bounce yet this year. Shorts are still short.
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