QE

Is the Rally About to End?

The following is an excerpt from Private Wealth Advisory...

The stock rally is at a critical juncture.

As I’ve mentioned before, a key momentum signal I like to watch is the 12-month moving average (MMA).

Over the last 20 years, this has been an excellent gauge for whether or not the market is in a bull market or breaking down. We had a few “false breakdowns” in 2010 and 2011. However, those signals were negated when the Fed launched QE 2 and Operation Twist respectively: both policies ignited stocks higher. This will not be the case this time (more on this later).

10-26-15
As I noted back in early September, Bear Markets do not happen all at once. EVERY time a major top has formed and stocks have taken out this line, we’ve had a stock rally to “kiss” the line one last time before the bear market really took hold.

Back in September, I forecast that we’d have a serious stock rally to “kiss” this line. Having chopped sideways for a month, stocks have finally staged that rally.  We just barely poked above the 12-MMA last week.

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What comes next is anyone’s guess. However, the fact remains that the last two violations of the 12-month moving average (2010 and 2011) were reversed by stock rallies kicked off by new Fed monetary policies (QE 2 and Operation Twist, respectively).

In the current political climate the Fed will be unable to do this. Private Wealth Advisory is not a political newsletter, but in a market climate in which Central Bank actions are the primary drivers of asset prices, we have to consider politics on occasion, at least in terms of their impact on Central Bank decision-making.

With that in mind, I want to note that wealth inequality has become one of the biggest issues for the 2016 US Presidential election. This topic has ensnared the Federal Reserve as a number of media outlets have finally caught on that QE and other Fed policies have in fact exacerbated wealth inequality.

With that in mind, it is highly unlikely that the Fed will be able to launch a new QE program or other major monetary policy anytime in the next 13 months (the election is November 2016).

Unless this stock rally can continue to go vertical, then we’re doomed to establish new lows. Stocks are sharply overbought and more overvalued by most metrics than almost any other time in history(only the Tech Bubble featured more ridiculous valuations).

Meanwhile, both corporate earnings and revenues are rolling over as the US re-enters a recession. My view: this rally is on borrowed time.

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Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in It's a Bull Market

More QE Will Not Stop the Coming Crash

The markets are surging this morning based on hype and hope of more QE from Central Banks. This view is overlook the fact that EVERY collapse follows a pattern:

1) The initial drop

2) The bounce to “kiss” former support

3) The real implosion.

We’ve passed #1 and are in the middle of #2. Next up is #3.

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Abroad, the damage has been even worse with China, Brazil, and the Emerging Market complex as a whole imploding.

China’s stock bubble has burst.

unnamedBrazil has taken out its bull market trendline.

unnamed-1As have the Emerging Markets as a whole.

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The hype and hope of more QE misses the point…

The bull market of the last six years is over.

We will get bounces, like the one that has occurred in the last two weeks. But the trend is now down.

Already investors have begun to realize that Central Banks have lost control of the markets. This is why they erased months’ worth of gains in four days’ time.

Indeed, at this point, it looks as though the END GAME has begun, ushering in a crisis that will make 2008 look like a joke.

Smart investors are preparing now, BEFORE it hits.

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Phoenix Capital Research

Posted by Phoenix Capital Research in It's a Bull Market
The Greatest Central Banking Con Job in History

The Greatest Central Banking Con Job in History

One of the greatest con jobs in history was convincing ordinary people that Central Bankers care about the “economy” or Main Street.

Aside from the complete lack of relevance that Main Street has for Central Bankers from a professional perspective (more on this in a moment), when do you think was the last time that Janet Yellen or her ilk spent an evening with non-banker/financial types? Years ago? Decades ago?

Yellen lives in a super-affluent, gated part of Washington DC. And even within that subset of the US population she lives in a higher echelon: her entourage of security annoys her wealthy neighbors… though I suspect part of the annoyance stems from jealousy.

Regarding professional significance… why would Janet Yellen care about ordinary people? They’re just data points in her financial models. Ordinary people didn’t place her at the Fed (the big banks did). And they didn’t place her as Fed Chair (the financial/ political elite did… with the express intent of gaining future favors).

Think of it this way… imagine there was a super cartel of English Professors who controlled what words you or I could use in daily conversation. These individuals literally could change the structure of the human language if they wanted… removing words or adding words at random.

Now imagine that they randomly pick out a low level English Professor who they elevate to being the face of their organization. Do you think this professor would give a damn about how her decisions/ words affected speech? She literally was made one of the most powerful people in the world by this cartel.

This is case worldwide. Most Central Bankers came up from the Too Big To Fails or Primary Dealers (or they are academics like Yellen or Bernanke who get their first taste of the “real world” when they’re literally running the financial system).

Literally their entire personal net worth… their professional clout… and their sense of accomplishment was derived from working at these organizations.

And somehow they’re supposed to give a hoot about Joe the Plumber or Bob the Boilermaker? They don’t even deal with those people face to face when they have a problem with their homes. “Hello this is Mario Draghi… the man who controls the currency in your economy… could you please come fix the sink?”

This is why Yellen, Draghi and the like can say with a straight face that maintaining ZIRP or NIRP benefits the economy. It’s why they can spent trillions to bail out/prop up banks without batting an eyelid. It’s why no one who committed fraud went to jail. It’s why lying and cheating in the financial system is allowed… even applauded… because the ones lying and cheating are the same people who picked out/ promoted the regulators.

And this is why we’re heading for another Crisis… one that will be even bigger than 2008. The fraud that caused 2008 was not solved. Instead it was allowed to spread into the public sector. Today most Central Banks are sporting leverage ratios that would put Lehman Brothers (pre-crisis) to shame.

So the next time something breaks in the financial system… it won’t be just individual banks going belly up. It will be entire countries. What’s happened in Cyprus and Greece is coming to your neighborhood… wherever you are.

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Posted by Phoenix Capital Research in It's a Bull Market