-- Published: Wednesday, 20 August 2014 | Print | Disqus
As the yearly end of summer doldrums engulf the Hamptons, the uber-wealthy position themselves for a rocky coming storm when the robust fall trading season begins. Some of the most memorable major equity collapses happen during this time of year. Logic, fundamentals and sound business analysis has very little to do in forecasting when the actual plug will be pulled on the rocket ride in stocks. In a rigid game, the house always knows when and at what time the fleecing of the mark happens. Such timing projections do not apply to the decline in the purchasing power of the dollar. More appropriately, Federal Reserve Notes are only compulsory money because of the legal tender laws. Yet, financial instruments are gauged in terms of their worth by the dollar redemption value they produce.
"The illusion of wealth is now most critical when preserving the myth of the welfare state: some 50% of all US pension fund assets are invested in stocks and only 20% in Treasurys . . . The only lifeline left is pushing pension funds out of their existing asset allocation sweet spot and forcing them to buy stocks. Whether this gambit will work is unknown."
Will the Fed be able to avoid a market crash?
The answer of course is no. But, while we have explained countless times why central-planning always fails in the end, we will give the podium to Fred Hickey, aka the High-Tech Strategist, who gives a very poetic summary of what the Fed's endgame will look like:
"The Fed hasn't made the world a better place with its interventions. It has created moral hazard, encouraged the formation of asset bubbles that eventually pop (leaving economic messes), widened the wealth inequality gap to record levels, discouraged savings and investment, severely penalized retirees on fixed incomes, encouraged spending, funded massive government deficit spending by monetizing the debts, lengthened the recession and likely reduced the number of jobs that would have been created if the economy had been allowed to take its normal course. Eventually the Fed's policy interventions will also have created debilitating, widespread consumer inflation, the "cruelest tax" against the poor and middle classes."
Well, there you have it. This is the worst economic Catch 22 in memory. Any astute and honest breakdown of these circumstances must conclude that the conditions, that have brought the once greatest economic wealth creation engine to an abrupt seizure, are self-induced to aggrandize a select cabal of global elites.
So when will the joy ride end? For ordinary consumers the easy money train hit a brick wall with the 2008 financial meltdown. Not so, for the insiders who took corporate welfare and low equity prices to their smashing advantage. No other manufactured bubble has been more profitable for the royalty of Wall Street since the great depression.
"The "Soros put" is a legacy hedge position that the 84-year old has been rolling over every quarter since 2010. Since this was an increase of 638% Q/Q this has some people concerned that the author of 'reflexivity' and the founder of "open societies" may be anticipating some major market downside.
Furthermore, remember that what was disclosed yesterday is a snapshot of Soros' holdings as of 45 days ago. What he may or may not have done with his hedge since then is largely unknown, and since there are no investor letters, there is no way of knowing even on a leaked basis how the billionaire has since positioned for the market.
Then again, considering that not only Yellen, who has warned about bubble pockets in stocks, but the BIS, Icahn and numerous other fund managers, now openly warn that the entire market has entered bubble territory, perhaps this is a case where the simplest explanation is also the right one... "
Is this just hype or should prudent people go to cash for protection from the next round of financial implosion? The answer may surprise most investors.
Stock pricings have little to do with the economic strengths, performance and future projections of the underlying businesses. Capital markets no longer serve their intended purposes of raising money to fund the operations of productive businesses. Equity downturns, turn into panics when central banksters and government planners need to create financial chaos to interject their newest consolidation system schemes.
A truly free market in commerce, much less in finance, does not exist. The dollar is not a real medium of exchange, but functions as mandatory barter vehicle for a captured society. Convertible rates of exchange with foreign currencies are more a result of political dynamics, than economic equilibrium.
Maybe you should heed the warning when, Billionaires Dumping Stocks, Economist Knows Why, which reported that, "It’s very likely that these professional investors are aware of specific research that points toward a massive market correction, as much as 90%." Wow, spin that projection into a mere correction in an overheated market. Just maybe a 1962 Ferrari 250 GTO is not such a bad ride after all.
Remember you need cash to pay taxes. For those unlucky enough collecting government pension checks, you will get no sympathy if your retirement goes up in flames. Being a career enabler of a fraudulent political dynasty that destroyed entrepreneurship and the merchant economy deserves to be on poverty row with the rest of the country. The crash for a shrinking middle class has already occurred. Rest assured, Forbes reported, "The ranks of the world’s billionaires have swelled to a record 1,645 including 268 newcomers", will not be feeling your pain.
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