That's exactly how the globalized Ponzi Scheme will end. Wealthy investors will try to take their money out of risk assets only to realize that their account balances are merely a notional illusion...
The stock market has no magic pot of money. Prices represent the last marginal price someone is willing to pay for stock. Regardless of whether volume is high or low, the last price paid, at the margin, determines the notional value of the entire market. We know that stock market volumes have been declining steadily since 2008 and that upwards of 70% of that dwindling volume is produced by High Frequency Trading (HFT) algorithms trading on millisecond boundaries. We also know that the market has diverged significantly from the underlying economic fundamentals, as investors respond overwhelmingly to the liquidity provided by Central Banks at the expense of underlying fundamentals. All of which means that the last price paid has become a less and less reliable indicator of the market's true fundamental value. Over $200 trillion of notional asset values are dependent upon Central Bank drip feeds to high frequency trading bots churning on millisecond boundaries, scalping fractions of a cent per trade, giving off illusory price signals in the process.
Fool Me 15 Times, Shame on Me
Unfortunately, a liquidity driven market is strictly a greater-fool's market, similar to what we saw in 2000 with the Nasdaq. It works great, until it fails catastrophically. While the Idiocracy has an infinite supply of fools, it has a continually dwindling set of fools with money. Having "experienced" the DotCom bust, the housing bust, the 2008 meltdown and now the Apple carnage, there are an ever dwindling supply of new fools with money available to throw at the market.
We are just now starting to see the types of rising volumes more indicative of a market seeking it's true price level. As these volumes increase, the liquidity driven illusion propagated by Central Banks and HFT bots will yield and crumble. Beneath that carefully managed facade, real buyers who were pushed out of the market long ago, will be nowhere to be found. Once a ponzi starts to unwind in earnest, it becomes a self-reinforcing feedback loop in which lower prices bring out more sellers as everyone recognizes that the longer they wait, the less they get back...
We are just now starting to see the types of rising volumes more indicative of a market seeking it's true price level. As these volumes increase, the liquidity driven illusion propagated by Central Banks and HFT bots will yield and crumble. Beneath that carefully managed facade, real buyers who were pushed out of the market long ago, will be nowhere to be found. Once a ponzi starts to unwind in earnest, it becomes a self-reinforcing feedback loop in which lower prices bring out more sellers as everyone recognizes that the longer they wait, the less they get back...
