22 March 2018

Stocks and Precious Metals Charts - An Apéritif to a Banquet of Consequences - Dow Industrials Drop 700+ Points

"What is most offensive is not their lying— one can always forgive lying— lying can be a delightful thing, for it leads to truth.  What is offensive is that they lie, and worship their own lying."

Fyodor Dostoevsky, Crime and Punishment

“A true opium of [worldly] people is a belief in nothingness after death— the huge solace of thinking that for our betrayals, greed, cowardice, and murders that we are not going to be judged.”

Czesław Miłosz

Stocks continued selling today. What was particularly discouraging for the bulls is that there was no afternoon rally.   In fact, the selling accelerated in the last hours of trading, and the major indices went out on the lows, and on heavier volume.

One might point to the new tariffs to come on China, and fears of a trade war. Earlier this week one would look to the Fed, and talk about the rising interest rates, probably the most carefully telegraphed monetary decision in history.

Perhaps it was the latest antics of Facebook, in the general growth of the abuse of privacy of the public by government and their corporations. One might also look to the dysfunction in Washington, and the misguided policies that have been crippling the middle and lower classes to the advantage of the one percent.

Let's skip the usual bullshit exercise of identifying the reasons for this sell off for the moment shall we?

Certain financial assets, like the major stock indices, led narrowly by the FANG tech stocks and the financials, had been lifted to new heights by what certainly looked like the utter mispricing risks.

And as we have seen in the last two asset bubbles and subsequent financial crises, prices continued rising to even greater over-valuations.  They were lifted on a cloud of misrepresentations and  the purposeful weakening of transparency and regulation, from the purveyors of stocks and their many purveyors of the big lie designed to support the economic status quo.

As I have cautioned,  when this mispricing of risk continued to expand,the 'trigger event' needed to knock the market off its blocks would decrease in required magnitude, until something incidental, or a cluster of rather minor incidents, would be enough to send prices down, and with a vengeance.

So far this latest market decline is what I would call a 'market break' and not a 'crash.'   As a reminder, there was a disquieting market break in March 1929 that was quickly forgotten, until the market breaks of September, culminating in a bloody October.

The Father of Lies
It will not take much for some semi-official group to turn the markets around by buying the SP 500 futures at a key moment.  There is not much fundamental stock picking in this market;  it is all index ETFs and narrowing momentum.

Buying the futures to turn things around could be done by the Fed or some other NGO that is working with their compadres of the revolving door.   One group wants to get rich, and the other wants to not be run out of town on a rail. 

That has been a 'go to' solution since the mid-1990's. It is very possible that stocks will find a bottom, perhaps in a true selling capitulation, and then turn and run back up to perhaps a new high later this year, led by the usual suspects and their aficionados.

But if there is no financial reform, if there is no return to good governance and honesty in the major mechanisms of the financial system which, after all, is the capital allocation heart of any capitalist economy, there will once again be a crash, a staggering correction in prices, for the third time since the year 2000.

There was a very minor flight to safety today. The US Dollar managed to drift slightly higher within its recent trading range. And in the usual manner of the recent currency trading of the precious metals, gold and silver were off a bit in response.

And let us not forget that there will be an option expiration for gold and silver on Monday.

Government bonds caught a bid, which was a bit odd in this interest-raising environment needed because things are just that good in the real economy right?   We certainly don't want any overheating, as in higher wages for working people.

Wall Street will be dropping another IPO into the markets tomorrow in Dropbox, unless they call it off for reason of market conditions.    I suspect that they will try to stabilize the markets while Wall Street squeezes this latest creation out.

This is not going to end well. But if we get another rally, all of this gloom will be forgotten, and it will be bread and circuses and the latest scandals of the rich and frivolous all over again.

And when it really hits the wall, when the financial system is thoroughly knackered, we can always blame Trump, or Russia.

Have a pleasant evening.