Wednesday, December 21, 2016

The 1929 Revelation

Herbert Hoover was elected in 1929, the same year the stock market had its blow-off top and subsequent record decline. He was a hard-nosed Republican who believed that government is always the problem and markets are always the answer. The markets rewarded him by losing 90% of their value by the end of his single term...

At the peak of the market, economist Irving Fisher said:
"Stocks have reached a permanently high plateau"

Today we have this moronic hubris:

Because, printing money is the secret to effortless wealth:

And yet, also today, Bob Pisani of CNBC, says we have this one major factor to thank for this entire eight year rally...

What got us from [Dow ] 10,000 to 20,000? This is the primary reason: Federal Reserve policy.

By keeping rates low for so long, the Fed forced investors into riskier assets such as stocks and high-yield bonds, and helped create a new acronym: "TINA" or there is no alternative (to owning stocks).

To be sure, there were several secondary reasons the Dow is on the cusp of 20,000:

1) Financial engineering [stock buybacks]

2) The Trump victory

Talk about a ringing endorsement for a rally: The Fed coerced investors into a financially engineered market, by keeping interest rates at 0% for eight years. Bueller?

And on this last point, to recap: Trump wins unexpectedly, which annihilates the global bond market due to his already-planned tax cut. High dividend stocks and growth stocks are likewise obliterated. An epic sector rotation into cyclicals ensues, even as insiders sell stock with both hands. Wall Street dusts off from the Clinton loss and fabricates the "reflation" narrative to con RECORD inflows into financials and other cyclicals. And then they panic buy the planned dismantling of 2008 regulations, that were put in place to protect them from the exact same serial psychopaths as last time: 

"The market sees the banking industry as a dog off its leash"

Meanwhile, the entire rest of the world gets monkey hammered to pay for the tax cut. 

"They were reading Atlas Shrugged, when they got flushed down the toilet. No one saw it coming"

The #1 reason for this eight year rally, is:

The Jedi Mind Trick for stunned printing and low interest rates for eight years straight, while the real economy is sold for special dividends...

"This is a 1950s-style market. We could see another decade of lies and corruption"

Or we could see a corrupt society of circus clowns flushed down the toilet from all time highs, amid record panic and dislocation...