Stocks are not done yet – Update

Courtesy of Read the Ticker

There are a few times in history when a third party said this US paper (stocks, funds or bonds) is worthless.



Here is two.



1) 1965 Nixon Shock – The French said to US we do not want your paper dollars please pay us in gold. This of course led to the US going off the gold standard.



2) 2007 Bear Stern Fund Collapse - Investors said their funds collateral was worth much less than stated. This of course was the beginning of the great america housing bust of 2008.





In both cases it was stated ..”look the Emperor is naked!”… (The Emperor’s New Clothes - Hans Christian Andersen)



The plot ..

Two swindlers arrive at the capital city of an emperor who spends lavishly on clothing at the expense of state matters. Posing as weavers, they offer to supply him with magnificent clothes that are invisible to those who are stupid or incompetent. 

The emperor hires them, and they set up looms and go to work. A succession of officials, and then the emperor himself, visit them to check their progress. Each sees that the looms are empty but pretends otherwise to avoid being thought a fool. 

Finally, the weavers report that the emperor’s suit is finished. They mime dressing him and he sets off in a procession before the whole city. The townsfolk uncomfortably go along with the pretense, not wanting to appear inept or stupid, until a child blurts out that the emperor is wearing nothing at all.

The people then realize that everyone has been fooled. 

Although startled, the emperor continues the procession, walking more proudly than ever. [Blog point – This is the stage where we are in 2020, full 100% stupidity.]

The points is, when a child (i.e the lower and middle class mass) can see the truth, the swindle is up!



Post a financial swindle the avoidance of loss is overcome by investors with huge financial resource and little sense. Buyers of last resort. To buy worthless paper at 100 cents in the dollar to extinguish all investor loss. The US Federal reserve has been executing this task since 2007. Their balance is now near $7 trillion, maybe add on currency swaps, treasury general accounts and it may be closer to $12 trillion.  



The point is, when some one calls US financial paper (either stocks or bonds) worthless and that someone is most likely to be the masses, or the lower and middle class, this is the modern day equivalent saying the ‘Emperor is naked’, and either one of these will follow at a much faster pace than ever seen before.



(1) Paper assets (stocks and bonds) suffer a massive negative price adjustment to true fundamentals valuations. 



(2) Paper assets (stocks and bonds) are supported by the buyer of last resort (the US Fed) and massive money supply creation results in a lower currency price. 



Of course the US central bank has being executing (2) above for 10 years, but now the masses are catching on as they ask why is gold and silver the best performing assets.



Note, The bitcoin rally of 2017 was also an alert.  



Gold per once over $2,000 USD is church bells ringing!



Maybe when gold is over $3,000 USD the ‘Emperor’ also realises he is naked. Well to conclude, until this happens risk on assets should continue to rally (subject to central planners policy mistake or act of god or act of gold!).





The US FED is now at this stage.

And when the music stops, you will not be first to know.

And you will tell your grand kids this valuable lesson on the day before the venture into the world.

Changes in the world is the source of all market moves, to catch and ride the change we believe a combination
of Gann Angles,
Cycles,
Wyckoff and
Ney logic
is the best way to ride the change, after all these methods have been used successfully for 70+ years.
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