THIS MARKET IS A CON GAME!
Today’s market excesses are much worse than at the last peak, in 2007. The enormous global leveraged speculative trading positions will implode. Who cares about the timing of the next collapse? The deep structural problems, the imbalances, and the public and private debt issues have not been addressed at all. These have grown out of all proportion. All the cracks have just been papered over by another Bubble in virtually all asset classes, caused by loose money. Deal frenzy and M & A (Mergers & Acquisitions) mania are back. The resulting confidence boost will turn out to be short-lived, because the facts of the real economy have been intentionally misrepresented. The world today is much more vulnerable than 7 years ago. Central Banks are out of ammunition. ‘Whatever it takes’ has become somewhat of a hollow phrase. The global economy is weakening and there are few signs it will take a turn for the better, while speculative markets are massively mispriced. It’s an illusion, that things can be kept under control, once the markets suspect, that this is not a never-ending Bull market, for whatever reason. Central Banks don’t have supernatural powers! Have they ever been able to ‘manage’ Financial Manias in the past for long? Market liquidity could suddenly evaporate if nobody is ready to take the other side of the trade. What will be the trigger? Perhaps something ‘small’ like Portugal, just like ‘tiny’ Subprime (13% of the total U.S. mortgage market) in 2007?
Market faith will be shattered quickly if economic prospects remain relatively poor. Risk premiums have declined all the way back to 2007 lows! The current environment looks especially fragile as markets and fundamentals have diverged sharply. The next contagious downturn in asset prices could turn out to be much worse than the last one, 7 years ago. It will suddenly dawn on the markets, that the only route to recovery will be to establish realistic prices for distressed assets and then write the losses off. The world is riddled with bad debt everywhere. The miraculous performance of extremely speculative assets always precedes a serious bust. Be forewarned!
Onorthodox monetary policies will eventually be seen as an abject failure. They may not even have ‘bought time’. As the ridiculous market distortions, resulting from these policies, become clear, we wish we had known that we have been setting ourselves up for another Great Financial Crisis. But this one will be the Big One. Suddenly, the world will be set back in time, with Bank Holidays, Capital Controls, Wealth Confiscation and Political Upheaval. And a sharply reduced global standard of living. The wrong medication had been prescribed!
RICK SCHMULL
12th July, 2014
WESTCLIFF-On-SEA, ESSEX, U.K.
