Ironically, the very success of stock market manipulation only thins the market of legitimate participants and thus increases the probability that risk that has been suppressed for years will erupt uncontrollably.
Longtime correspondent B.C. recently shared some provocative thoughts on the nature of the next Bear Market. Bear markets are often defined as a decline of 20% or more from recent highs.
Consider the possibility that the banksters now effectively control the stock market in ways never before possible, using the NY Fed acting in concert with the dark pools, offshore shell companies and pass-through entities, PTFs, and high-frequency trading (HFT) via the for-profit exchanges.How much would it "cost" the primary dealers to manage the markets using leveraged derivatives, assuming a complicit counterparty or counterparties?
Hypothetically, if the banks wanted to keep the SPX to no lower than, say, 3% to 7% of the 200 dynamic moving average (DMA) indefinitely, thereby keeping the 200 DMA in a steady uptrend, what would it cost? A few tens of billions at the margin?
If one or more parties could leverage 10:1 futures and then 10:1 again with options, it would cost a small fraction of banks' ~$13 trillion in assets and $1.7 trillion in cash assets.
One can at least envision the possibility of banks continually leveraging of futures and options on futures, rolling the positions forward while keeping sufficient amount of incremental liquidity to further lever long as required.
We can infer that if Wall Street banks wants the market to go down because it's the best opportunity for them to make money given the alternatives, a bear market will occur; but it will be blamed not on cyclical factors, overvaluation, etc., but on some other perceived "exogenous" factor, such as the "fiscal cliff", war, "policy mistakes", etc.
Yet with the banksters having directed Bernanke to explicitly talk up the stock market for more than three years, even specifically referring to the Russell 2000 (small-cap stocks) as a benchmark, to expect that a bear market will occur is by definition to assume that (1) the banksters will act in some manner to allow, or cause, a bear market; or (2) their efforts will fail to prevent one, risking their credibility and legitimacy. Given the hyper-interventionism and expectations management, one is left to assume that the banksters have the capability to prevent a bear market until proven otherwise.
But without a bear market, valuations will not improve enough to permit a future return that warrants the 35-50% cyclical drawdown risk in the meantime.
How does one trade, speculate, or allocate assets in an environment where one is like a conspicuous, slow-moving target in a shooting gallery for the HFT and PTF sharpshooters, or one's assets are hardly more than part of a slush fund for fee scalpers who add no value to the economy or society?
My new book Why Things Are Falling Apart and What We Can Do About It is now available in print and Kindle editions--10% to 20% discounts.
1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.
10% discount on the Kindle edition: $8.95(retail $9.95) print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)
|Thank you, Robert P.($5/month), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.||Thank you, Cheryl & Jim S. ($5/month), for your wonderfully generous resubscription to this site --I am greatly honored by your ongoing support and readership.|