2018 will go down as the biggest bull trap in world history without any comparison. Gamblers are now trapped by the lie that plundering grandchildren is the secret to effortless wealth; because were it not for Ponzi borrowing, the U.S. would already be in recession. Meanwhile, the Fed will continue imploding global asset markets until gamblers finally admit this was all just a Jedi Mind Trick for weak-minded fools. Which will be too late.
“All told, 90% of the 70 asset classes tracked by Deutsche Bank are posting negative total returns"
"In 1931, 77% of asset classes lost ground...More recently in 2008, 68% of asset classes went red."
Zerohedge summarized the various divergences and obligatory contradictions that made 2017 the least volatile year in history while then making 2018 one of the most volatile years in market history. Basically, all of the lies that attracted record investment in 2017, blew up in 2018.
Now, entering 2019, gamblers are required to accept even bigger lies. Because everyone knows that the way to fix imploding lies is with even bigger lies:
Divergence between China and the U.S.: The U.S. will "win" the trade war by collapsing the world's second largest economy and by expanding the U.S. trade deficit
Divergence between the U.S. and the rest of the world: The U.S. economy will expand nicely, while the rest of the world implodes due to global synchronized liquidity reduction
Divergence between U.S. Monetary and Fiscal policy, colliding at the intersection of continuing rate hikes
But nowhere is the chasmic divergence between fantasy and reality wider than between U.S. stocks and the U.S. economy. Which happens to be discussed nowhere in the mainstream media nor in the alt-reality conspiracy media. The fake wealth effect that got us this far and which is unwinding at the speed of "sell", is apparently not a factor despite the largest asset class wipeout in 100 years. To date, ~$16 trillion of global wealth imploded in stocks alone - leave aside every other asset class now collapsing in real-time.
Why no mention? Because the Ponzi wealth effect that Central Banks used to boost the economy, is unwinding far more quickly than the world's economists can adjust their backwards-looking models. Financial markets don't sit around waiting for GDP estimates to be revised. Nor do they wait for monthly newsletters to be printed.
Mohammed El-Erian attempts to thread this last and greatest fantasy contradiction, but he ends up doing a half-assed job of explaining how we get to an orderly Ponzi unwind process:
"Coming out of the 2008 global financial crisis, central banks went out of their way to boost asset prices as a means of supporting the economy. They suppressed volatility by driving down interest rates; buying huge amounts of debt securities"
[Then came long overdue normalization]
Fast forward to now:
"...the risk has risen that volatility could undermine the global economy, and that some investors may lose confidence in the orderly functioning of financial markets.
In other words, gamblers, economists, politicians, and the public are forced to now admit that this is the weakest recovery in U.S. history and therefore "normalization" is not really possible. Because let's face it, it's NOT possible. Trump borrowed 4% of GDP in order to have 4% GDP "growth". Plundering grandchildren being the "secret to effortless wealth", almost as good as printing money.
They can either admit that fact, OR, they can continue to suffer in silence, as the pain mounts with each passing day.
Either way, the truth hurts.
“Everyone is looking for a reason why the markets are sinking. Blaming quantitative tightening has really taken center stage,”
Asked if the weaker economic outlook projected by the central bank on Wednesday justified a slower pace of run-off, Fed Chairman Jerome Powell told reporters the plan would remain on “auto-pilot.”
