Market Bulls are Full of Bull
The list of idiots who believe that the economy is in recovery and that the bull market is, apparently, eternally long is, itself, eternally long. I became breathless critiquing their dumb comments and had to cut the list short:
Here’s a simple one to start with: Marketwatch’s Brett Arends says,
“Now is the time to buy stocks. Buy, buy, buy…. I’ve just thrown a whole bunch of my money at the stock market…. Sitting on my hands because I’m too worried makes no sense,” Arends says.
Well, sitting on your hands makes a lot more sense than going broke. Maybe if your head doesn’t work really well, sitting on your hands so they don’t get you trouble would be wise.
The problem with permabulls is that they have a nearly religious conviction that worry is wrong. Optimism is the creed for the good guys, and worry belongs to pessimists.
Well, that is only true when the optimists are right. I prefer to be a realist. I am optimistic about my life — brightly and cheerfully so — but I am completely realistic about what I see coming. My optimism does not tell me that good times will come if I continue to believe in them contrary to all evidence. My optimism tells me that, when bad times are coming, I will make it through, and I will be able to find good aspects of life even in dark times.
I guess I have a steely-eyed optimism. I feel great about life even when I see myself surrounded by dark clouds. I don’t have to paint the clouds in rosy tones or call them something they are not in order to keep feeling good. I love a good lightning storm. I am capable of seeing things exactly as dark or as light as they are and feel good either way. Maybe that’s the difference between faith and optimism.
Because of his foolhardy, blind optimism, Arends has just thrown a whole bunch of money down a rabbit hole: (That’s not the kind of thing I do to feel good.)
I fear that future returns may be at the low end. But that’s still better than a slap in the belly with a wet fish.
There may come a day very soon when he will wish he had taken a belly full of fish slaps over the cudgeling he’s getting from the stock market. But, hey, some people like self-inflicted pain.
I’m glad I’m not among the losers right now because I listened to me and pulled all of my money out of stocks before all of this hit:
Among the losers from the global stock plunge are star managers Leon Cooperman, Raymond Dalio and Daniel Loeb. Cooperman’s Omega Advisors suffered a 12 percent slide for August through Wednesday, according to The Wall Street Journal…. Loeb’s Third Point and William Ackman’s Pershing Square Capital Management also have endured significant losses, putting them in the red for 2015. (Newsmax)
No wonder, I feel optimism even when I see times as dark. Because I saw the darkness for what it was, I got out of the market and didn’t lose a cent during this plunge.
Never assume that because they’re big or famous, the talking TV heads and big-name economists have any ability to see ahead at all. If that were the case, there never would have been a Great Recession, for it was entirely the biggest of the big that caused it. They didn’t believe it was coming, even as they created it!
Another thing that causes bulls to rush headlong over the cliff like they were dimwitted little lemmings with every bear market that comes is the mantra “buy the dips.” If you want to be a bull because you love to be optimistic, and you think that optimism means never seeing the bad times as bad when they come, then you will look at every downturn as a going-out-of-business sale and snarf up what you think are bargains only to be caught in a market where a sinking tide lowers all boats.
CNBC’s Ron Insana is one of the big talking heads on television that pursues that line of thought, which I shall call Insana’s insanity:
While I am, and have been, concerned that China’s best days are behind it, I remain convinced the opposite is true for the U.S…. The bull market may have been interrupted with the first 10-percent correction in nearly 4 years, but the bull has room to run…. Go shopping on Wall Street…. Individual investors can pick up some stocks that are on sale, good blue-chip companies that are down 20 percent, or more.
So, eight months is a mere interruption?
Buy the dip is fine when the dip is a dip, but Insana is insane. This is a long slog through a swamp. What if I’m right, and this is the beginning of an implosion of the biggest economic bubble we’ve seen to date?
Ironically, Insana admits that the stock markets of this world need to be rigged if the game is going to keep going, but he doesn’t see that this is where he is missing the obvious. This is where he becomes truly insane:
“First, Chinese officials need to take appropriate and effective steps to shore up its economy and market,†he said, adding that Beijing is headed in the right direction.
“Second, the Federal Reserve may need to step in and convince domestic investors they will stand ready to support stocks by delaying an anticipated September rate hike.â€
Really? Beijing has completely destroyed any real stock market by its interventions already. At the time Insana wrote this, the Beijing market had already become a completely rigged game where you could buy and sell only what Beijing told you you could buy and sell. Says Insana, we need a little more of that before it’s safe to get back in the market in China, but we also need more of that market rigging here. The US market needs to hear that the Fed will bail it out with endless supplies of additional free money directed at investment bankers. That’s the only way, we can be sure this is just a dip because we’ll know the bubble makers promise to keep inflating the bubble.
Wow! Apparently, it has become the new mission of the Federal Reserve to backstop the US stock market so that bulls can be confident they have a universal-size safety net.
Paint a little more rose dye on my glasses, please, so I can pretend the days ahead are good because I have Federal Reserve stock insurance to back up my investing wishes.
Don’t think, though, that this wild market that needs Fed shoring to be safe for investors is any threat to you income. So says another MarketWatch writer, Chuck Jaffe:
I asked George and Ilene how the market action — undeniably ugly but not panic-inducing — could hit home so quickly that they forced immediate changes.
Their answers were illuminating, largely because they showed a disconnect between gut instinct and portfolio, a zone where people let market gyrations affect them in ways that are unwarranted.
Moreover, George and Ilene are far from unique, as numbers from several big fund firms showed that investors weren’t just checking account balances when the market was moving, but making protective moves.
Apparently, the last thing you want to do when an enormous bubble in the stock market is crashing is protect yourself. In my opinion, George and Ilene saw the bigger picture but saw it a little late: they knew the economy was already in rocky shape and feared they had not gotten out quite in time. Jaffe is gaffing when he says they’re just panicked: “Attention, all passengers on the Titanic. You’re over-reacting. This is just a leak. There is no evidence yet that the ship will completely sink.”
Sometimes bad news is bad news, but Jaffe likes to see the lighter side:
What’s happening now isn’t coming close to worst-case prospects.
Well, it’s never close until it’s too close, is it? By the time you realize, “Oh, yeah, this actually is a worst-case prospect,” it’s too late. And that again, is why the permabulls always run headlong over the cliff.
What’s happening right now might not prove to be the “worst-case prospect,” but according to another MarketWatch article, it was already the worst jolt in a long time:
Dow posts biggest monthly loss since 2010. Nonetheless, Goldman Sachs is sticking to its year-end 2015 S&P target of 2,100, which reflects upside of 6% from here.
When Goldman Sachs made this prediction ten months ago, I wrote they were nuts. It was obvious to me that market had hit a hard ceiling and that the head winds building against all economies in the world would only increase to gale force and that nothing truly had been done to build a solid foundation for the economy. It was as much bubble-finance time as ever. Some people, however, cannot see or admit their bubblevision is wrong, even when the end is playing out.
David Kostin, its chief U.S. equity strategist, said in a note on Monday. “Continued positive macro data will be essential if our forecast is to be realized,â€
Good luck with that.
CNBC seems to find more than its share of dimwits in the lineup of contenders for the dullest crown. In another headline, they write:
It’s a bull market, just doesn’t feel good.
Oh. It just doesn’t feel good. In this video, Kristina Hooper of Allianz Global Investors is challenged head-to-head by CNBC’s host about the recent fallout in the market place:
CNBC Host: Hey, I’m getting really hurt in my positions here for the year.
Kristina: For many investors, this could be an opportunity.
Host: But not for investors who followed your advice, you told people, “Cash is not the place to be; be fully invested.”
Kristina: And we’re saying we’re likely to have a very choppy market in August, but hang in there; we’re likely to see an improvement by the end of the year.
Even if I believed that, I’d get out now and re-enter at the end of the year. But I don’t even believe that. The host pursues his line of questioning:
CNBC host: I wonder if you regret telling people to be fully invested when the market continues to fall.
Kristina: Absolutely not. Because what investors need to do is not worry so much about short-term movements.
The glaring question that raises for me is “Why on earth would she thinks this is a short-term movement?” The bull market completely died more than half a year ago. The market has banged along the ceiling sideways for months, and now its falling as global pressures build and with no evidence that they will stop building. How truly dumb do you have to be to think a change to the trend trend that has already been ongoing for the entire year is “short-term?” I’d call that a “change in trend.”
A window into just HOW dumb you can be came up when CNBC’s host moved on to interview Dave Donabedian of Atlantic Trust:
Dave: We came into the year with the view that the bull market would continue but with a lower trajectory and more volatility, and that’s pretty much what we’ve seen here today.
He gets interrupted by the host who rebuffs him for this ridiculous comment:
Hang on, hang on, hang on, David! I’m sorry, David, but that simply isn’t true! If we have another day like this, we will have erased our gains for the S&P 500 [for the entire year], and we’re now in August. That’s not the continuation of a bull market surely.
No, surely it is not. Nor can eight months of sideways trading be called a bull market by anyone. Well, so you would think in a sane world, but apparently we live in InsanaWorld. People have been talking about this sideways market as if it is still a bull market for the entire year, and you cannot make them stop. A permabull is a permabull no matter what:
Dave: I think we want to get away from what’s happening on a given day in the market.
A GIVEN DAY IN THE MARKET! Oh, my gosh, the top of my head just blew off. Since when is a sideways trend that lasts months a “given day?” And, since this was spoken, there have been many more “given days” of sharp drops in the S&P 500. But we don’t want to pay any attention to that because it interferes with our calculus.
This is the kind of discussion that tells you the market bulls truly are driven by blind insanity in their determination to see everything as an uptrend:
Dave: When we look at trends for the S&P 500, we’ve obviously seen very substantial gains going back to 2009, and we expect that we will end up this year for the S&P 500 again…. Because the conditions for a bear market simply are not in place.
Wow! In other words, if the past eight months in the stock market doesn’t fit your trend line, just ignore it; go back further to find that long stretch when the line was upward, and say, “That is the line that continues forever. The last eight months was an anomaly.”
It is the same kind of blind faith that said in 2007 housing prices would always rise because they had been rising for many years in the past. That was spoken like a mantra, even when housing prices had been slipping away for half a year.
Well, up is up, until things go down. The upward trend ended this year:
That graph shows the last eight months of the S&P 500. I’m having a hard time spotting the “upward trend.” How many months of flatlining does it take before an “upward trend” stops being an upward trend?
I have a much longer list of blind-bull comments I was going to share, but this last one twisted my mind like a pretzel. That’s enough for one day. What clearer proof could you ask for that the vaunted talking heads see what they want to see and always keep a can of rose-colored tint handy, in case the coating on their glasses starts to wear thin?
Tuesday, September 22nd 2015 at 9:26 pm |
The cognitive dissonance is strong with these perma-bull shills. Still remember hearing about Jim Cramer prating about buying stocks just a couple weeks before the 2007 crash. I’m astonished at the blatant lies they are spreading about the economy, seriously all this disillusionment is giving me a head-ache.
Anyways I found your blog through david stockman today, great stuff! I was hoping to hear from what you think will precipitate the crash?
Tuesday, September 22nd 2015 at 10:57 pm |
The argument I’ve built on this blog is that the number of things fundamentally wrong about the economy, coupled with the lack of any action being taken to correct the problems so that a healthy economy could grow, plus the number of headwinds blowing against it from all over the world add up to so many structural flaws trying to brace against so many stressing forces that collapse is exponentially becoming inevitable. The global economy (as well as the US economy) is looking like a Jenga game with so many pieces pulled out, you wonder how its still standing. In that environment, I’ve said the actual trigger can be anything.
The main contributing factor, however, that makes collapse virtually assured this fall is the Fed’s interest-rate increase — ironically, whether it happens or not. One of the things I wrote awhile back is that by fall, the Fed will have said it is going to do this for so long, and it will be so anticipated (and dreaded by the permabulls who know what feeds them, though they don’t admit it) that the Fed will be damned if it does and damned if it doesn’t.
Raising rates could easily trigger a panic because so much fear of that moment has built up for so long. (But more importantly because the bull market was actually dependent on that free money.) Not raising rates (as the Fed chose for September, but we’ll see for October), is equally going to cause fear. That’s because we are at a point where people will start to realize that the Fed really cannot raise interest rates without destroying the stock market. People will start to wonder if the Fed will ever be able to raise rates. That realization can turn into a panic, too. So, that’s what I’ve said would happen if the Fed didn’t raise rates, and that is exactly the kind of discussion you see building right now.
If the Fed raises rates, the artificial life support is over. Because that life support is what has driven the market so high, the market has to fall when the life support ends. If the Fed doesn’t raise them, people will see that the “recovery” must be very weak, in spite of what the Fed claims.
While the interest rates are the key factor, just as QE was for the change that ended the bull market last fall, you also have all the pressures that are building around the world. Add to that the fact that most stock market crashes do happen in the fall, and you realize there is something about fall that causes things that are ready to fall … to fall. Then look at the rounded top of the stock market as it graphs out. I’ve been talking about that here all year. You can see that it now has exactly the shape of the last major crashes. We’re now standing on the tip of the cornice waiting for it to break. While all the investment gurus last year were talking about the bull market that would continue this year, I began last year talking about how the bull had already died and about how the market would flat line in the months ahead and then round downward. Major crashes typically come with some big downward action along with some spiky rebounds before they really go over the cliff.
Add to all of that the generally prevailing psyche in the world today. I have noticed many people expecting all kinds of catastrophic things to happen this particular fall from asteroid impacts to end-time prophecies, and it causes me to think pressure is building in the American psyche for a panic. People are primed. While the whole economy will collapse regardless of a panic, there is always a major panic when the lad begins to slide that accelerates the fall. Major collapses never happen in one plunge, but with lots of up-and-down chop, like we’ve been seeing for the past month; but, at some point, reality dawns, panic sets in, and we go over the cliff.
Now, I’m not saying the market is going to fall because of fear. The entire economy is going to collapse because of how deeply flawed it is by design. It’s just that fear is a lubricant for the slide that happens the moment people realize the structure really is falling of its own accord. The fear will come in the present case when people start to see that the recovery really never was. That’s the “Oh, my God” moment. You can already see that people are thinking and wondering about this. I think you will se the big change in public psyche start with the first day of fall. You can already see cracks in the earth where the land is already giving way.
That’s because, as I thought it would, the Fed’s decision last week removed some of the blinders. The talk about whether the Fed ever can raise interest started to show up this week in the media from the tops of some of the largest investment firms. The erosion into fear can happen very quickly from this point on as that conversation gains momentum; but there will likely be a single event that is the one rock that tumbles first that starts everything else going that is ready to go. And that rock can be anything. On a mountain with a whole lot of rocks ready to slide, who knows which rock will be the first to roll? The mountain, itself is ready to go. It matters not which stone makes the first motion.
Wednesday, September 23rd 2015 at 7:48 am |
Very eloquently put. I’ve been foreboding the crash for a while. I’ve been also looking at the political side. Do you think in the coming years after the crash that we will become a totalitarian society? It all seems to point in that direction with the eroding of the constitution and debasement of currency.
Wednesday, September 23rd 2015 at 9:29 am |
First, let me take the opportunity to follow up on what I said above with some comments this morning from Ron Insana, one of the financial gurus I criticize in the article above:
“If slowing global growth and market turbulence was a reason to pause [on the Fed’s interest-rate hike], how likely was it, then, that all of that would be resolved by October?†he asked.
“Since Chair Yellen spoke, a number of Fed officials have spoken, reiterating that a rate hike in 2015 remains likely. This is cognitive dissonance at its worst. Investors are now simultaneously worried about incompatible outcomes,†he wrote.
“If growth is weak, and inflation continues to fall, the Fed should NOT, and would NOT, raise rates. If this global problem is truly transitory (a word most Fed officials need to look up in the dictionary), then a rate hike should have already occurred,†he wrote.
(http://www.newsmax.com/Finance/StreetTalk/Ron-Insana-Fed-Economy-Investors/2015/09/22/id/692767/#ixzz3mZvxF861)
How’s that for the next day’s news showing the very kind of argument I said would rapidly emerge, whether the Fed raises rates or not? The Fed is now stuck. Even the insane Insana looks at what the Fed just decided and says, “If you cannot raise rates now, how is it that you think you will be able to in October?” Even Insana says essentially that, “If you keep telling people you’re going to and then don’t, the market will get fatigued from all the jerking around you’re giving it.”
Of course, Insana wants the Fed to keep doling out the free money; but he’s right about the fact that those headwinds blowing against the US from the rest of the global economy certainly are not going away in October. And the Fed has absolutely no control over that. So, if the Fed raises rates in October, it will do so in even worse conditions than now. And, if it doesn’t raise rates, the chorus has already begun, “If not now, when?” The Fed is looking more and more stuck in hole every day. People are questioning whether there will ever be conditions where the Fed can raise rates (and, of course, there won’t because the market is addicted to those rates). The longer the Fed waits, the worse the global conditions are becoming.
As for the societal conditions that will come into being when the global economy does collapse, my speculation may not be better than anyones; but I’ll point out the following factors that I think will form a trend:
Civil unrest has grown a great deal in the US over racial issues and immigration issues. Harder times with new drops in jobs will only make that unrest worse, not better.
Police are already using tougher military tactics to contain unrest (armored vehicles, etc.)
Operation Jade Helm appears to be readying the military for working covertly among civilian populations in order to control tense situation. Whether that is intended for possible use at home or not, I don’t know; but these are developing skills that could be employed at home if necessary.
When the present collapse unfolds, I believe it will be far worse than the start of the Great Recession because I believe and have said since Fed stimulus began, that QE and low interest rates are only masking the depths of the Great Recession. When those props are removed, we’ll find out how great the Great Recession really is. The patient (a debt-based economy) has already died and is only being maintained by artificial life support. As that fails or is removed, everyone will see that the patient is dead.
Because the problem is global and the artificial stimulus was globally the same, the answer to the problem will be global. Moreover, people want electronic money more than cash now because they do much of their buying online. Because online buying constantly jumps borders without people even knowing they’re dealing with a company outside of their nation, the need or desire is growing for a global currency. So, ultimately, I think we’re headed toward global economic answers.
That said, the chaos in the middle is going to require suppression, and I think we’ll see people willing to sacrifice some of their freedoms for security, just as we did with 9/11 where suddenly the government no longer needs a warrant if they suspect you of terrorist activity. So, that seems to be the direction we’ve already started moving. Chaos creates fear, and many people will give up rights just to feel more secure.
–David
Wednesday, September 23rd 2015 at 10:57 am |
Exactly on point with another contrarian like yourself, Peter Schiff. He doesn’t believe that The Federal Reserve will raise rates in October nor December. He says that they have tunnel-vision on raising inflation and lowering unemployment. All the indicators are pointing downward. You have bubbles in the auto sector, student loans, junk bonds, energy bonds, and many more. Yet The Federal Reserve keeps prating about sustaining higher inflation, his diagnosis is that they aren’t going to raise under their own volition considering it will prick the bubble. He also said using job openings as a indicator is intellectually dishonest because people lose jobs not before a recession but during one.
Do you have any articles that addresses the falsification of the job report numbers? Also since what you said is true because history rhymes, what precautions can I take to mitigate the damage done to me? Any books to recommend?
Thank you and I appreciate the timely and prescient replies!
Wednesday, September 23rd 2015 at 11:36 am |
I’ve written a number of times on the baloney in the jobs data. Here are a few articles on that subject that I’ve written here over the years:
http://thegreatrecession.info/blog/unemployment-rate-underrated/
http://thegreatrecession.info/blog/dial-a-spin-on-jobs-data-jobs-report-numbers-spin-out-of-control/
http://thegreatrecession.info/blog/great-recession-job-loss-continues-predicted/
A number of the articles I’ve written about economic collapse (you can use that tag or the search function) have a list of books at the end that might be helpful. I have not read all of them, but I do try to search through Amazon to find books that are highly rated by readers and that sound like they give interesting perspectives.
I’m long on being able to say what is going to happen with the economy and being quite accurate about that over the years, but short on being able to say how to best protect yourself. That’s because the kind of collapse I see coming is broad enough that, like an outgoing tide, it could and probably will cause all boats to settle. Stocks are certainly the least safe. Bonds do not look a lot better. Banks and their money-market funds will all depend on which banks fail. Nevertheless, I moved my own 401k’s out of stocks a couple of months ago and to mostly bonds and and money-market funds because those were the only alternatives. That saved me about a 10% loss in the past month. Long-term, it’s hard to say, as those other instruments will face problems in the months ahead.
Gold is not as safe as people say because you have to think about 1) who owns most of the gold. (Governments and central banks.) And 2) why do they own it. (Probably mostly to protect their currencies because they know people flee to gold when the currency is in trouble. If they own lots of it, they can dump it on the market to kill the price of gold just as people flee to it. 3) How do you buy, move it, store it, and sell it SAFELY. Who do you trust to do all of that with your money?
In short, the gold market has been manipulated in the past and can be again, but gold is likely safer than stocks.
Owning land where you can grow things is a good hedge so long as you can keep paying your mortgage and property taxes and so long as you have the knowledge and fortitude to grow things.
Relationships — people you can work together with — will be huge. This is where things like a small church, if it has genuine fellowship, might be very helpful. You will need to be able to contribute as much to those relationships as give, or it doesn’t work. Some people can give time and labor; some can give food they grow, etc.
I’ve found my own faith in God gives me a lot of optimism (not about how the times will be but about the belief that I will make it through them and be able to find good in them). That’s not something one can just pick up. The strength from that comes over time by experiences one has. So, I’m just saying that I have experienced a lot of times in my own life when I felt like God was carrying me through — enough times that were richly rewarding, in spite of their struggle — to where I don’t fear those times in the desert. In the very least, I’ve found the struggle builds character and depth. The desert has its own kind of austere beauty. I don’t expect those times to be easier, but I am amazed at how deep and good times can be even when tough.
Some people, of course, say to store away provisions, and that may help some for the short term. It gives you something to share with others, and may buy you a few months to find your way through a rapidly changing world; but that’s all it does — buys a little time and give a little to share. Still, that’s a benefit, if you have some surplus now that you can use to store things away.
On a small scale, it is prudent. On a large scale, I think it sometimes becomes obsessive. Things will not save you. Relationships, knowledge and understanding, and faith in God will carry you further. The latter, you cannot just adopt, but you can look and explore and ask questions to see where it leads. (I write “you,” but I’m speaking generally.)
In the midst of these times, I find many bad examples in religion as well. Popular false prophets of doom and gloom abound. Just look for a church with healthy relationships and look to give as much or MORE than you get, and you will be helping to create a supportive life for others and yourself, and somehow you’ll make it through. It will be quite a journey.
Wednesday, September 23rd 2015 at 2:17 pm |
Yeah I’ve been reading a lot of history, I understand what could possibly happen, thank you for your extensive advice on the issue. I will also read up more on your blog. I’m incredulous to some of things you are saying, but being disillusioned by most of the events going on, I believe it. I will heed your advice and start finding people I can trust, I whole-heartedly appreciate the magnitude of your replies. Just 3 short months ago I didn’t even know the federal reserve printed money for free! Now here I am positioning myself against this tidal wave of shit. In the midst of all this, i’m happy I could read some great contrarian material by a great writer. Keep up the great work!
Wednesday, September 23rd 2015 at 5:32 pm |
Thanks. I appreciate your kind thoughts.