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THE CIRCUS ARRIVES: Stocks Rallying – Check Your PULSE!
The S&P 500 is up four weeks in a row – just like it was at the beginning of 2018.
Contrary to a year ago, though, there is NO optimism at all, whereas then investors were acting as cheerleaders. What is there to be thrilled about, anyway?
Politicians have allowed central bankers to raid the public markets, helping their friends in high places to loot taxpayers since time immemorial. All that has changed is that they have become better at lying and at concealing it, using skillful deep state agents.
Who gains from higher stock market valuations? Only the rich do. Who profits the most from rising real estate prices? Governments do, as they get to appraise values higher, thus to collect more on taxes.
Higher prices also mean more interest debt to banks, which makes the entire system run smoothly.
There is, virtually, no one raising their voice on the Chinese stimulus measures, being taken at the moment, though.
Yes, the Federal Reserve is the most important financial institution in the world, but investors often marginalize and underestimate PBOC (People’s Bank of China) and its magic wand of propping-up liquidity levels.
Mind you, China’s government is working to stave-off civil unrest and mass unemployment, as it is a different country with a completely separate agenda than that of the U.S., but, rest assured, they want the trade deal resolution as much as anybody.
Corporations in the U.S. have borrowed $13T in the past 10 years – in what world is that kind of behavior deemed normal? The fact of the matter is that taking-on business debt isn’t the same as piling up personal, consumer debt.
When CEOs borrow, they do it, since they have, in most cases, come up with a plan to pay the money back, while growing their operations. In other words, after paying principal and interest (P&I), they intend to have a stronger corporation. Consumers use it to pay for stuff, the type that don’t generate a financial return, but only an emotional one, such as a fancy car, a luxurious vacation or other forms of entertainment.
However sound has it may seem to borrow when rates are attractive, within these CEOs, there are incompetent ones as well. In a competitive world, all companies do not thrive together – that would be impossible. When credit becomes tight, a big part of these leveraged balance sheets, held by some illogical management, will have to default, partially or entirely.
This last market correction, which took the NASDAQ into an official bear market trading range in December, has been just that, a wild correction. Stocks trade for high valuations, but not out-of-hand ones, either. Like I said even before this whole correction began – bull markets end with stupid euphoria.
In other words, while this mess in Europe with Brexit persists and while the U.S. continues to look like a shadow of its old self, stocks are soaring because Smart Money is pricing-in resolutions, which will birth a relief mania, a euphoric ending to the cyclical bull market.
We know this because Larry Fink, CEO of Blackrock, the world’s largest asset manager, just said so himself.
His remarks are a stark match to what we’ve been writing about for weeks – the third year of a presidential term is all about giving voters a taste of victory, the sweet honey of results, and you can bet your bottom dollar that Donald Trump is all about a grand finale.
To think otherwise is to be naïve because the pent-up stress, felt by nearly every person in the world, from the flammable situation with North Korea a year ago that prompted headlines about WW3, to the impeachment headlines of today – we’ve all been living in one, constant and relentless pressure cooker.
Be cautious about making concentrated bets into any asset class, but keep in mind that rookie investors have already put 2008 in the back of their minds and they’re ready for the circus to come and entertain them with glorified headlines of peace and harmony.
Welcome to the bubble year.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!