This sums up all of human existence. Trumptopia. And ten years of pounding sand up my ass...
No wise man has the power to reason away
What seems to be
Is always better than nothing"
mor·al haz·ard
/ˈmôrəl ˈhazərd/
"lack of incentive to guard against risk where one is protected from its consequences"
A summation of factors is leading to the biggest plunge in liquidity in market history: The earnings buyback blackout, the Fed rolloff, the ECB liquidity cessation, the dollar reversal of fortune, and the ongoing Tech rout. Brain dead gamblers are fat, dumb, and happy.
The biggest prevailing misconception about markets is the failure to understand that consensus-seeking behaviour leads to adverse outcomes. Unfortunately, humans by nature seek affirmation from other hairless monkeys, which in markets is lethal. Right now, the consensus is that central banks yet again will orchestrate a global synchronized soft landing deja vu of early 2016.
“Markets are now pricing in little chance of rate hikes for the remainder of the year."
So far, this scenario is eerily deja vu of late 2015/2016: The Fed raised rates in December (2015 and 2018), both times the wheels came off the bus immediately thereafter, the Fed whispered sweet nothings, and by February it was off to the races.
Here is where it gets different:
Difference #1: Mass complacency
Again, the irony of markets is that if no one sells then unlike 2016, the market is now overbought instead of being oversold:
The second major difference is that notwithstanding Friday's exuberance, the Fed has yet to determine how and when to curtail balance sheet rolloff.
For now, it remains on auto-pilot:
Likewise, for some unknown reason the ECB picked now to curtail stimulus even while acknowledging this past week that risks have shifted to the downside.
Fortunately, they meet again in six weeks in case they want to change their mind. Of course, the S&P futures meet every nanosecond in between.
The third major difference is the fact that rates are much higher today than in 2016, which means that money markets are yielding more than the S&P 500:
The fourth major difference is that we are further along in the Ponzi cycle, which is why credit markets are not responding to the nascent happy talk.
Note the amount of volume now versus 2016:
In summary, you have to be brain dead to believe that now is deja vu of 2016. Hence, belief is ubiquitous
"What a fool believes he sees
No wise man has the power to reason away
What seems to be
Is always better than nothing"
No wise man has the power to reason away
What seems to be
Is always better than nothing"
