Look at those makets go!
Nasdaq 4,960 – just 40 points to 5,000 after popping up from 4,600 at the beginning of the month. That will be almost 10% in a month if we pop 5,000 – no wonder no one wants to buy a home or put money in the bank when the stock market spits out 10% monthly gains.
This is, Janet will tell you, perfectly normal folks – stock markets always go up at 100% annual rates in economes with no inflation, don't they? There's nothing wrong with this picture. Don't worry about where all this money is coming from if the GDP is essentially flat – it's delivered by money fairies and it will never, ever, EVER stop because there is no downside to pumping newly created money into the markets to enrich the investing class – none at all….
JUST IN CASE this turns out to be an unsustainable scam that blows up in people's faces – we do have some hedges in our Short-Term Portfolio and we'll be reviewing those in this afternoon's Live Trading Webinar (1pm EST), so tune in for that. As I said yesterday, the gains in our bullish, Long-Term Portfolio have gotten so ridiculous that we should cash them out but who wants to cash out when we (the investor class) are getting all this FREE MONEY?
It's not just Yellen and our Fed, of course. In fact, in the developed World, our Central Bank is one of the only ones that HASN'T made a surprise easing move this year already. A lot of people are expecting a nice surprise from Yellen as she addresses Congress today but Congress is getting nervous that perhaps $5,000,000,000,000.00 is a bit too much risk on the Fed's balance sheet already.
After all – if the Fed ends up taking a loss, it becomes a negative on our Treasury's balance sheet and then our National Budget gets thrown out of whack as the taxpayers get the bill for all the FREE MONEY the Fed has been handing out to the Top 1%. If that happens near an election, it may not be good for the Republican majority. Other than that, they couldn't give a crap…
By NOT keeping up with the masssive money-printing schemes of the other Central Banksters, our Fed has caused the Dollar to get stronger relative to all the other liquidating currencies. The Dollar is, in fact 20% stronger than it was this time last year and that is making the collapse in commodity prices look much worse to US investors and the Banksters and their pet media hounds are doing their best to chase retail investors out of commodities while they and their Hedge Fund buddies BUYBUYBUY.
See how well it's working? The net effect is that Retail Investors have been running out of one of the best market run-ups in history while the Institutional side is taking it all off their hands, back-stoped by the Fed's promise to roll over $80Bn worth of asset purchases every month – so far forever.
It's the Forever part that is now being tested. When will the Fed begin to compete with the Institutions and start selling those assets? When will the Fed really stop pumping all that FREE MONEY into the economy? Fortunately for the Institutions, the Fed TELLS THEM EXACTLY WHAT IT WILL DO, months in advance. This allows the Institutions to take full advantage of any policy change well in advance – like the way we're picking up index shorts on the cheap.
As you can see from the chart above, our $60Tn Global GDP had about $50Tn pumped into it between 2009 and 2014 – 5 years. That's 80% in 5 years or 16% per year of our GDP that we BORROWED. If you have a family income of $100,000 and you spend $116,000 and go $16,000 into debt – when asked what you are making do you say $116,000? No, that would be silly right?
Well, that's how our Global GDP works. It doesn't matter where the money came from, as long as it gets spent we're going to count it as income. It doesn't matter what the debts are because we're going to pretend they don't need to get paid (and, so far, they don't – just ask Greece, who are fixed again this morning). So, the more we borrow, the better our economy is and the better our economy looks, the more we get to borrow until, like Japan, we are 517% of our GDP in debt!
What difference does that make, right? If Japan wants to pay down their debt they can always borrow more money, right? The UK (run by former Goldman Sachs' Managing Director, Mark Carney) is also in Japan's league and China may LOOK like it's way behind (not even 300% of their GDP in debt), but that's only based on what they admit to. In reality, China may be worse off than all the rest.
Come on people, you KNOW this is insane. You KNOW this is unsustainable and you KNOW it's going to end badly. That doesn't mean we can't benefit from the BS but it does mean we need to remind ourselves of what total BS this all is and ALWAYS make sure we have an exit strategy – or else we may see all these paper gains go quickly up in smoke!
Until then, China will buy US bonds and Europe will buy Chinese bonds and the US will buy US bonds (because we sell A LOT of bonds) and US Retail investors will be told by disreputable brokers that they should diversify into Chinese stocks and bonds and Japan will buy China bonds and EU bonds and we'll buy Toyotas that are made cheap by our strong Dollar etc., etc.
What is there to worry about?