Monday, February 22, 2016

Markets Ignore Fundamentals And Chase Headlines Because They Are Dying..........

Markets Ignore Fundamentals And Chase Headlines Because They Are Dying

Stock markets are crashing, there is no other way to paint it. They are crashing incrementally, but crashing nonetheless. When you have violent swings in equities and commodities between 5 percent and 10 percent a day, then something is very wrong with your economy and has been wrong for some time. If global consumption and demand were really steady or growing, then you would not see the kind of systemic backlash in the financial system that we are now seeing.  

If companies listed on the Dow were making legitimate profits due to a healthy consumer base and enjoying solid expansion, stocks would not be increasingly volatile.  If investors and mainstream analysts actually looked at the real numbers in demand (among other things), then the strange behavior in markets would be easy for them to understand. They will not look at such numbers until it is too late.

Instead, markets have chosen to chase headlines, and here is where the ugly circle of normalcy bias and cognitive dissonance completes itself. There are no positive indicators within the fundamentals today to energize market faith or market investment. So, investors and algorithmic trading computers track news headlines instead. The MSM hacks now have the power (along with central banks and governments) to create massive stock rallies with one or two carefully placed news tags, such as "Russia To Discuss Oil Production Cuts With OPEC."

Market speculators and trading computers jump on these headlines without verifying if they are true. In most cases, they end up being false or just hearsay from an "unnamed source." And so, the markets then crash further down into the abyss, waiting for the next headline to bolster activity even for a day.

The sad truth is, if any of these headlines turned out to be legitimate, their effect would still be meaningless in the long run as the overwhelming weight of the fundamentals continues to topple poorly placed optimism. Now that the investment world no longer has the certainty of central bank intervention as a useful tool, they don't know if bad news is good news or if good news is bad news. The fact that the system is moving into a death spiral without the psychological crutch of central bank stimulus measures should tell you all you need to know about the supposed recovery since 2008.

No society wants to admit economic failure or economic sabotage, and this is why the con-game is able to continue in the face of so much concrete truth. 

Ultimately, the market trends and economic trends will flow into the negative. In the meantime, expect massive market rallies, rallies which will then disintegrate in a matter of days. And, whatever happens, never take what mainstream economists say very seriously. They have failed the public for long enough.

While central banks and governments have indeed been proven time and again to collude in efforts to cover up financial dangers, most economists in the media are simply greedy and ignorant.You have to remember, they have a considerable stake in this game.

Many mainstream economists have a personal interest in using their positions in the media to engineer positive market psychology so that their portfolios remain profitable. Not to mention, their professional image is at stake if they ever acknowledge that they were wrong for so long about the underlying health of the real economy. Mainstream financial analysts WANT to believe their own lies as much as many in the public want to believe them.

People are starting to get it:

The latest Lipper fund flow data is an and it is not pretty: in the latest week, there was $12.2 billion in equity outflows, the largest weekly redemption in 5 months and more importantly, this represents 7 straight weeks of outflows: the longest streak since 2008. However, offsetting this we just had the biggest 2-week gold inflow ($3.2bn) since May'10.

In a crisis, preservation of capital is first, everything else comes second.

The recent surge in stocks had nothing to do with bulls buying, and everything to do with shorts covering. And now that shorts have largely covered, and the market has begun to stall / fall again, even as buybacks continue, all those who have delevered and unwound positions, have a choice: buy at these still ridiculously high valuations at a time when the S&P is facing 7 consecutive quarters of negative annual earnings... or wait for the market to crash before stepping in.

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