PPT In Da House But…Too Little, Too Late

by Chris

Well, it turns out that the futures pop in the overnight “”markets”” could not be sustained and the indexes are selling off in today’s half-day, holiday market.

Steve Munchin [sic] yelled “Fire!” in a crowded theater and then tried to pretend it didn’t mean anything.  Just testing, ya know?

Meanwhile, various popping rivet sounds are emerging from all over the financial landscape, and whatever the PPT is doing today, it’s probably just shoveling very expensive sand into a still developing sinkhole.

Bubbles take time to form and time to pop.  Big bubbles take a really long time.  So looking at the US equities bubble from a weekly, monthly and even yearly time frame is important.

This yearly chart is about as ugly a one as you could manufacture.

I’m assuming, of course that the major US indexes don’t rally by 20% or more over the last three trading days of the year.  Seems like a safe assumption.

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Otherwise, that’s a nasty looking top there, and it bears repeating that the prior nine years before that top were all complete BS manufactured by interventionist central banks attempting to print up an enduring prosperity.

Maybe they can find a way to extend things a bit longer, maybe not, but every extension has only bought additional height at the expense of safety.

All that’s left at this point are the tears.  Every credit cycle ends the same way, always.

Why?  Because as John Stewart Mills once said all that “capital has already been hopelessly betrayed into unproductive works.”

It’s gone, man, it’s gone.

I mean, check out these prices for North Dakota oil, understand that the average well up there needs $60 oil just to break even, and each well declines 85% in just three years, and you can probably feel the capital destruction all the way from over there as you sit in your chair.

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Ouch!

Or think about the leveraged loan markets infested with zombie companies now unable to roll anything over because that “market” suddenly caught the flu and can’t get out of bed.

Betrayed.

It turns out lending money to companies unable to pay it back was a bad idea.  Who knew?

The predicament of central bank money printing is that it paints everyone into the same corner.  Chasing yield leaves everyone stuck in the same corner with no way out.  First leaver advantage takes over, a scramble develops, and the Treasury Secretary convenes the PPT at the eleventh hour.

Easy come, hard go.  It’s a self-referential problem.  What caused things to spike into the final blow-off top is the very same thing that drags them back down again.

If you want to understand central bank QE, study this next image until you get it.

 

 

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