The Big Collusion

[Mercury]

So Japan Manufacturing PMI comes in at 48, that's in contraction territory, and while it may not yet officially be a recession (or depression in the case of Japan - BTW coming to a Western economy near you...) and the Nikkei rallies!  The Yen drops vs the USD, I assume because the speculators think the BoJ will drop more stimulus.  How long can this bad economic news is good news for the stock market go on?

 

After the dust has settled on the next big crash, and it is imminent in my view, I think the next big book and movie will be about collusion between government, central banks and the big commercial banks.  This is the only thing propping up the markets and eventually that will crack and when it does you don't want to be on the wrong side of it...

 

Banks are struggling to make money in an ultra low interest rate environment, poor lambs, so I think thee Fed is under pressure to raise them.  What happens when they do?

 

USD rallies hard (or already has on the rumour).  EURO and Yen fall in value, which is what the CBs want so no more stim for the markets.  Stock markets crash...  Gold?

 

Timing?  Haven't got a clue really but rate rise in the US is being tipped for the Summer.  Sell in May and go away just might be the ticket this time.  May/June shorting season is my tip.

 

Til then, trade what you see... (short term only if going Long the stock markets!)

[Mercury]

And will remain broken until a major correction sorts everything out.  Too much debt that can never be repaid, could be a great time to be in the insolvency game...

[Bradders]

The economy has been doing not so well for many years and even the DOW hit new highs while the economy was in this state! 

 

I don't think the banks are struggling to make money, they rake it in no matter what. They have been getting cheap (probably free) money from the central banks through QE, etc. The banks should have been lending this to the average Joe to help build the economy but the banks have just been pumping it into the stock markets. The banks (plus other large financial firms) have the ability to influence the markets in their favour simply from their massive amounts of money to play with, so I don't think they are struggling.

 

You think that bad news being good for the stock market is silly, I remember a few years ago that there was positive news for the US economy and that sent the markets down as it meant the fed were more likely to stop QE!

[Mercury]

Bradders,

 

Bank earnings this quarter are firmly down, this, according to their own reporting, is due to low interest rates (and probably, as you say because of lower lending levels).  They are still making money just a lot less and what about the spectre of bad debts (debt has not gone down since the credit crunch).  What if the stock markets get the jitters (already has!) and the bond market falters?  Where will the banks make money in a falling market with low interest rates and bundles of bad debt loans?  Bank share prices haven't recovered anything like pre credit crunch levels for a reason, currently they are a bad bet.

 

You point re good economic news etc I fully agree with and it is the flip side of the bad news situation.  I think most of us seem to agree that the post credit crunch crash rally has been artificially stimulated by QE and ultra low interest rates have added to this and fueled debt expansion, despite that being a major part of the credit crunch crash.  In what parallel universe is any of this a good thing?

[Bradders]

They could short the market? Maybe I am a bit cynical when it comes to the banks.

 

I agree none of it is a good thing and it does feel artificial. China's lessening demand for everything already sent the markets into a tumble not so long ago and I thought that could have triggered 'The fall' but the markets came back up. 

 

I think several countries in Europe still have high unemployment too.

 

There just doesn't seem to be a lot of coverage on the real issues with the economy.

 

Maybe we are just waiting for all the signs to hit home at once then maybe there will be a correction?

[Mercury]

I'm cynical of banks too, I believe they colluded with the Fed and politicians to shore things up after the subprime scandal.  Or at least that the politicians were coerced into giving them a get out of jail free card (that being the public credit card...).  I wouldn't put anything past the banks but to short the market there has to be someone on the other side and given the size of these players that means another bank (of insurance company but surely they are wise to this now...) or the government.  In short (ha ha) they can't short the market if the market is crashing because no one will take the other side, the banks are the market makers really.

 

I suspect we will not get the kind of coverage we regularly hear on this, and other, forums from the MSM until it is all to late and the crash is well under way.  There are a few places where some are reporting the "truth" but they are not the mainstream.

 

I think we have already had a correction, in technical terms, followed by a rally but if the markets turn here that correction will not have been sufficient so look out below...  Even if we do get a Bull resumption it wont last much beyond last years all time highs before it crashes hard so why would you want to be invested in he market just to squeeze out a few last points, unless you had to be of course (like most fund managers and hedge funds in particular).

[Mercury]

I love that guy, finally an economist I can agree with and honestly, I didn't write his script!

 

I love his point about maths.  In the London major debate last night Goldsmith issued a classic political put down to Khan when telling him his views were wrong by saying "it's just mathematics really..."  Davis has just told all the bank employed economists and Treasury departments that they cannot add...

 

Shame he called Omaba a Marxist, bit too extreme and dilutes his message alas, makes him out to be a bit of a crackpot...

[Guest Condor]

Really enjoyed the J.Davis audio - thanks  for posting, C

[Mercury]

A picture paints 1000 words!  Substitute BoJ for the Fed and you get what happened last night and that was in a BoJ do nothing scenario, what would have happened if they actually did something???  The World has gone bonkers...  It will all end in tears.