Last month, the Federal Reserve started snatching up short-term Treasury debt to the tune of $60 billion per thirty days in response to the repo mess that sent a chill through Wall Street again in September.
While it’d sound like one other spherical of quantitative easing, Fed Chair Jerome Powell needed to make it clear: It’s not. “In no sense is this QE,” he stated.
Charles Hugh Smith, the writer behind the “Of Two Minds” blog, isn’t shopping for it. In a current publish, he recounted a riddle Abraham Lincoln apparently as soon as advised: “If I should call a sheep’s tail a leg, how many legs would it have?” — Five! — “No, only four; for my calling the tail a leg would not make it so.”
Smith used this chart to assist make his level:
“Calling QE not-QE doesn’t make it different than QE,” Smith wrote. “The Fed’s level of panic is noteworthy, as is the absurd transparency of its laughable attempt to conceal its panic.”
And with that panic, Smith believes that the current pop to new highs within the inventory market could lastly mark that elusive blowoff prime.
“The financial media is loudly declaring the current blowoff top in stocks is not a blowoff top,” he stated. “The delicious irony here is these denials are reliable markers of blowoff tops: the louder the denials, the greater the odds that this is in fact the blowoff top that many pundits have been expecting for some time, but always in the future.”
Smith identified that the media denied it within the fourth quarter of 1999 , after which did it once more within the housing market in 2006. Even nicely earlier than that, the pundits clearly weren’t anticipating the market’s rally in 1929 to show into what it did.
That’s the factor about blowoff tops, they’re lots simpler to see in hindsight.
Smith, nevertheless, believes he could very nicely be seeing one proper now, and he principally bases his opinion on the misunderstanding that the Federal Reserve’s “omnipotence and omniscience” will hold this bull market chugging proper alongside.
Which brings us again to the chart above.
“If everything’s just peachy in global banking and the U.S. economy, why the sudden mainlining of $300 billion of financial cocaine into the collapsing veins of the financial system?” Smith requested. “Can $300 billion, or $600 billion, or even $1 trillion continue to prop up an increasingly risk-riddled, fragile $330 trillion global bubble in overvalued assets? Just as a matter of scale, the answer is ‘not likely.’”
ended final week on a excessive, closing above 28,000 for the first time ever. The Nasdaq
additionally rallied properly. We’ll see how lengthy these ranges final, contemplating futures are wanting a bit weak heading into Monday’s buying and selling session.