Every investing age has its own story explaining why It’s
Different This Time:
- Buy and hold with the Nifty Fifty
- Stock prices have reached a permanently high plateau
- Information technology is worth any price, because it's revolutionizing life
- Real estate can never go down
- Markets are Too Big to Fail. Central Bankers won't allow it.
The central bankers will use any amount of financial
repression needed to keep the elites in power.
Keep rates low and funds flowing!
Drive rates negative! Eliminate
all “excess savings”! And so it will go, until their tricks finally fail.
We've been here before. It's another bubble cycle, and all that’s
changed is that the central banks are a little more skilled today at keeping
the illusion alive longer. Market
professionals know the drill well, because they lose their positions if they
fail to follow the herd. So, they chase
stocks higher as fundamentals and market internals worsen.
I said it several years ago, and it is just my opinion, but I
still think that we have a stochastic stopping problem. How inflated do we expect prices to get? If you stay in the game, you might eke out an
existence, but history suggests that prospects are not good. History even suggests there’s a fair chance
that at some unknown time the bubble will burst and you’ll get something
precious chopped off.
All of this financial trickery is just covering over the
structural problems. Developed economies
have become zombies. The people maintain
inflated expectations. Markets are casinos
functioning purely on central bank credibility.
There is no telling how long it will go on, or how high
markets can go. But it is increasingly
obvious that central banks cannot solve the underlying problems, and that the facade is cracking. Too much debt cannot be solved by adding more debt.
People are catching
on, and central bank credibility is at risk.
Willie Loman is out on the road again, on a shoeshine and a
smile, totally deluded.
