I have no answers or great insight other than all the others excellent comments and insights on this same subject (TF) over the past year or so, but we do know one thing is profoundly "different" than anytime in our lifetimes: the rate of change of total credit growth. If you just look at the US total debt (public + private) growth since 1970, it followed a nice exponential curve, doubling every 5-7 years, etc, up until 2007.
When that credit bubble popped in 2008, a natural correction to that unprecedented rush to that peak was *not* allowed to happen. Instead fiscal authorities and central bank authorities stepped in to bail out those aspects of the bubble that should have been allowed to fail. Yes, it would have been a brutal depression, probably very sharp decline but followed by an equally sharp rebound similar to Iceland's response to the bubble. Instead we are stuck with this "fake" economy in all developed world countries. However, a substantial foundation for the future would have been built in the rebound as the junk was flushed from the system.
Said fake economy has been on oxygen via central bank manipulations, free money creation, buying junk assets at par value, the Fed buying almost all of the 10+ year maturity new issue debt, etc. Everyone in the system is hoping, praying, that some miraculous "recovery" will take place, that all of the sudden the developed world will jump right back onto that exponential credit growth curve and restart total debt doubling every 6 years again, and that all of their manipulations will not have created a massive mal-investment bubble that will cripple said economies for years to come.
So what the heck is my point here? Damned if I know. I guess it's just that all the developed economies *are* different this time. It would be easy to bury one's head in the sand, put the nose to the grindstone and forge ahead with some inner belief that if you just keep at the plan long enough it will turn around. After all that is the history over the past 40 years or so, right? I would agree 100% with that assessment if all these mechanisms creating a fake pricing in world's markets were not in place. This is financial repression 101, 201, 301, 401 and as of September here in the USA, financial repression is now in grad school with 501 and 601 level courses in progress.
Just imagine if tomorrow all the world's central banks said no more money creation and we're going to sell off all these junk assets over the next five years so that we can return to a "normal" central bank functioning as soon as possible. Where would the S&P price within 2-3 months? Where would the long bond price? The currency cross-rates, gold, crude, cattle, copper, etc?
That's the problem in my eye. It's all fake due to financial repression. Just look at the monthly chart of AAPL I posted a couple of months ago as it reached 700 showing a horrifically small and declining volume on the whole rally this year from the 300s. IBM shows a similar declining volume on the monthly as does the overall market and many other stocks.
The old technician in me saw (sees) all of that as evidence of a "fake" market sucking in the unwary, all related to massive mal-investment being created by the central banks actions and plans. Another one is "dividend stocks" -- think about that one for a moment. The entire investment world is clamoring for yield since you get next to nothing (or pay out money in German, Swiss, etc short term debt) on bonds (and a negative real yield), so the masses are "being forced" to buy "dividend stocks" to get yield. I've kept some notes this year on specific issues being put forward in the "media" on this subject -- stuff like when INTC was in the high 20s earlier this year and being compared to the 10yr T-note where INTC was yielding twice was the note was yielding "but you have to opportunity for 'growth' with INTC". Now that anyone buying that missive from the pundit has lost about 9-10 years of "yield" in the price decline, you have to wonder how long these "dividend investors" will put up capital loss. 30%, 40%, 50%? Who knows, but just another example of mal-investment bubbles being inflated by the Fed et al.
/rant off -- time to enjoy this wonderful 60+F sunny day here in North Carolina.
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