This market has had the “market” beaten out of it. If I had any sense – – or, more precisely, if I had the sense to not have any sense – – I’d just throw charts and reason out the window and dump my entire net worth into SPDR S&P 500 (ARCA:SPY) calls so I could spend the next ten years cleaning out my nostrils. But I’m not dumb enough to be smart, so I can only sit back and watch, slack-jawed.
Take the chart below, for instance, from which I’ve removed the price bars; I merely show a trio of exponential moving averages (50, 100, 200) against the S&P 500 index.
The “market” didn’t die in late 2008, when the Fed began its massive intervention. Although trillions of dollars of money from thin air gave the market a bottom, which allowed it to commence a turnaround on March 6, 2009, we still had a market to play with. I’ve marked this section as “1”.
During this time, we had a couple of meaty downdrafts. The first was in the summer of 2010, when Europe (and, more specifically, the Euro) looked ready to fall to pieces. The Euro and U.S. equities were virtually one and the same (and in case you hadn’t noticed, these two have long since decoupled, since the utterly-trashed Euro, were it still joined at the hip to US markets, would have dragged the Dow many thousands of points lower than it is right now).
Suffice it to say that Europe went “all in” with the kind of insanity that the US Federal Reserve had conjured up, and that crisis was “solved.” (You’ll have to forgive my frequent use of quotations in this piece, but I find them necessary; were I telling you this verbally, I would be using air quotes.
The second downdraft was the very next year, late in the summer of 2011, when the nation’s staggering debt was causing alarm. (I would point out at this juncture that this “staggering” debt was trillions of dollars ago, and Uncle Sam would give his left nut to reduce his debt down to the level of mid-2011 at this point). This time, a spineless John Boehner caved in to Obama, and the notion of any kind of limit to the nation’s debt was thrown out the window. The debt ceiling become a permanent joke.
Once these crises were past (and, even then, I was bitching up and down about the market, although at this point I’d give my left nut to get back to those relatively halcyon days) we entered a new period, which I’ve marked as “2”. During this period, a witch’s brew of global central bank intervention had calmed things down to a point where the market was not only still ascending, but doing so almost without interruption.
The final phase, in which we are still very much living, is marked 3. This era was ushered in by the introduction of QE3, which was the final nail in the coffin of the “market.” By this stage, it was so screamingly obvious that global central banks would jump in at the slightest hint of anything scary to equity buyers, that there was simply no reason to be scared anymore. As you can see by the moving averages, they had been becalmed to the point of utter coma. BTFD was gospel.
What’s troubling to me is there’s nothing that should suggest anything but a state of permanence to this situation. The five remaining equity bears on Earth are all saying the same thing: “We’ll get ‘em in 2015.” To which I reply: why? What’s going to change?
Why, if the market dropped 10%, would the central banks simply not print up a few trillion more? Who is going to tie their hands behind their backs? Why on earth would they not keep doing what they’ve been doing to the degree necessary to preserve their power and privilege? If the vast majority of the public is too blinkered to understand or care, why should we not accept this never-ending nightmare as a new and very permanent reality?
As a verbal insurance policy, everyone from Cramer on up has been declaring “This will not end well” ever since 2009. The only hard lesson our nation seems to have learned from the financial crisis is that it’s important to cover your ass verbally so that you can refer to a cautionary quote uttered at some point and tell the public: “See? I told you so.”
But this, to me, is sort of like the magic of Elliott Wave analysis: given two possibilities, A and B, if you provide a scenario in which either may occur, you are assured to be right every single time. All you have to do is recount the waves (or refer to the ancient media quote).
There is no one who wants to see sensibility and reason return to worldwide markets more than me, good people. But after all these years, it’s hard to sustain any hope that anything is going to change. Put it all into Facebook Inc (NASDAQ:FB) and Alibaba Group Holdings Ltd (NYSE:BABA), you monkeys. Janet’s got your back.