The financial markets are making money, but they aren’t making any sense

mesnip30716Last winter, when the stock markets briefly woke up to how bad things are, the leading lights of Davos came out of their various pow-wows to state that the markets were mad, because “none of the economic data support this correction”. In point of fact, the indicators have sinced turned out to be a whole lot worse than predicted, but the world’s stock markets are powering ahead. The Slog takes another wry look through the looking glass of bourse capitalism, but remains baffled.


If you are in need of amusement – and own a darkish sense of humour – you could do a lot worse than take a daily dose or two of Bloomberg television….or Boombust TV as I call it.

Aside from the fact that the presenters talk at a phenomenal rate (it’s a bit like listening to a cattle auctioneer who just did a line of coke) there are two consistent reasons why the station always cheers me up. The first is that it is unintentionally funny all the time; the second is that every day in every way, the anchors and their guests debate things they call “mysteries” which are, to the rest of us, blinding flashes of the bleedin’ obvious.

Even the ads are funny. “Look around the world today,” says one Sovereign advertiser, “and the answer is clear: it has to be Indonesia”.

Right then, Indonesia it is. I must rush down the pharmacy and pick up 50mls of Indonesia. I never realised until now that the missing element in my life was, um, Indonesia.

“Great economic growth potential,” the voice-over continues, “with a focus on footwear, shipping, electronics and retail”.

This is a focus? I’d hate to meet an out-of-focus Indonesian. It’d be like trying to lasso ether.

Equally hilarious is the Brexit Count. Boombust mentions Brexit and its wicked effects about forty times an hour. UK housing slumps, stock market dumps and Donald Trumps….they’re all thanks to Brexit.

However, it has taken just seven weeks for the markets to win back all the losses they so foolishly sold off after June 23rd. The Dow (said Boombust this morning) “is partying like it’s 1999”. Now then, as they’re doing this – and clearly they have clocked the breaking news that Britain is rowing away from the Lusitania – what will Boombust blame when the partying stops? I can  hear the drivel already:

“The Dow fell 2,600 points today as it became clear that Donald Trump is the clear winner of the Presidential election. Without Brexit he wouldn’t have gotten the nomination let along the White House, so thank you Brexiteers for saddling us with a psycho for the next four years….”

Yes, we’ll force 300 million Americans to vote for Trump, because thats the kind of scumbigotracistfascists we Leavers are.

If only there was a little more variety in the insults. Like maybe, bumfaggotrapenazis.Or perhaps sickophobicnutbags.

But ultimately, what makes Boombust unmissable is the 24/7 attempt not to notice the 40 or 50 huge, smelly elephants pooing everywhere in the studio. The morning presenter these days is an Irish bloke called Marcus Cranny, and he’s not really from the standard Bloomberg mould.

Marcus is what one might call a sceptic; I sense that he smells the elephant dung everywhere. Certainly, on occasions he tries very hard to point it out to others. Today he had an oil specialist on. Mr Cranny is pretty smart on oil and the Middle East.

“So tell me,” he asked, “the global economy is in slowdown, but now the oil price is edging up again. Isn’t there a bit of a mismatch in that?”

“Aaah,” said Ms Oilwhizz, “but you see, people are buying it because it’s so cheap”.

Er, fine. They’re stocking up. To keep that rally going for four months, somebody somewhere has got storage tanks the size of the Albert Hall.

“But the Saudis are pumping it out like we were in a boom,” said Marcus, “and still the price is steady at $42. Why?”

“Well,” said Ms Crudités, “I mean really, the oil business needs the price back at $60”.

Cranny blinked.

“But Saudi pumping isn’t going to get us there is it?”

“No,” she replied, “and I wouldn’t put much store by these talks going on to cap production”.

“You wouldn’t?”

“No sir, I wouldn’t”.

“Raaaeeeet,” said Marcus. The two of them just stared at each other.

So anyway, to summarise, the price of oil has rallied because there are talks with the Saudis about capping production….talks which aren’t going anywhere. Allegedly. So the price is going to fall again. But the oil business needs it to go up. Clearly, there is trouble ahead.

If, at that moment, a large trunk had come into screen left and sprayed the couple with water, I wouldn’t have been at all surprised.


But still the stock markets are surging ahead. Marcus Cranny says they’re partying like it was 1999. For myself, it feels more like 1929. Absolutely nothing fits, adds up, makes sense or looks real.

So I leave you with this encouraging news. To help dig itself out of a hole, Deutsche Bank this morning announced the appointment of a new BSD to spearhead overseas operations. They recruited the bloke from RBS.

Where else?


Last night at The Slog: Ipsos Mori proves the Progressives wrong. Again

27 thoughts on “The financial markets are making money, but they aren’t making any sense

  1. occams razor.. looks like ‘crazy’ .. acts like ‘crazy’ .. but they are just looting .. distraction is part of the con..

    Like

  2. Now when has a market speculator ever been interested in ‘sense’

    They are interested in making money: therefore whatever makes money is supported. If it’s an inflated dollar, the dollar gets inflated – well, until the Fed starts interfering, that is. Then they turn to Greece instead, push up the yields on their bonds by using CDSs and other derivatives – on which the speculators can turn the odd penny.

    It’s why the US economy will continue its long-term coma – and remain a truly worthy AAA rated asset.

    The speculator doesn’t care, it just feeds off the markets. Other people call them parasites, after all, they will eventually kill the host.

    Liked by 2 people

  3. I suppose it’s much easier to pretend all is rosy when the markets would have you believe this to be true.
    ‘Dumb and Dumber: Economist vs. WEF on Biggest Threats to Economy’
    The Economist and the World Economic Forum (WEF) have “dumb and dumber” competing notions as to what is the gravest threat to the global economy.
    The WEF says “Social Media Feed” biggest threat to democracy.
    The Economist says Populist Nationalism ‘Gravest Threat Since Communism‘
    https://mishtalk.com/2016/08/12/dumb-and-dumber-economist-populism-gravest-threat-since-communism-vs-wef-social-media/

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  4. Market partying like it’s 1999 is not so silly. The markets topped in March 2000 with the bursting of the dotcom bubble: Enron, Worldcom all went kaput, Microsoft, Amazon et all lost up to 90 per cent of their value. It was the biggest crash since 1929 until, well, 2008. In the meantime Gresham’s Law prevails: bad money prefers bad stocks to even worse bonds.

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  5. “So I leave you with this encouraging news. To help dig itself out of a hole, Deutsche Bank this morning announced the appointment of a new BSD to spearhead overseas operations. They recruited the bloke from RBS.”

    What’s that line again? You cannot make this stuff up?!

    Hilarious! Thanks John!

    DavidC

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  6. I don’t understand why no one understands it. It is perfectly simple.All you have to do is imagine a roundabout with wooden the horses bobbing up and down.
    The confusion seems to be that few understand the mechanism that makes the horses bob up and down whilst going round and round.

    As the global growth slows, commodities go down so oil follows that which makes energy cheaper that drives the profits higher that pushes the SPY to new heights, that draws attention to energy HY which rises as the bonds fall as defaults go up that drives investment to safer haven in treasuries that dr3ive treasuries higher which then forces yields lower which pushes funds into commodities that rise as global expectations on growth improve so corporates issue more bonds in the mining sector that pushes yields lower there that has an impact stocks that lowerrs their current profit forecasts but pushes future earnings higher which re-rates the P/E to ever higher levels but taxes are lower in EBITDA as profits slump which drives stock yields lower and pushes funds to treasuries.
    And then we start the next cycle all fuelled of course by the endless printing of what has now called monetary policy that certain of groups of egg heads who shall remain nameless being of a socialist persuasion and therefore could be categorised as pure evil, fascists, or mass murdering sickos, which as anyone can tell you includes a famous group including Stalin, Pol pot, Mao, Hitler Mussolini Blair Obummer, Brown and the sickest of the lot Mandlescum and Junkface not forgetting the Stasi Merkel and the ultimate Queen of all Evil and mass murder, Shitlery Clitsnot.

    The reality of course is that paper you fondly refer to as cash in your wallet is now worth less than the scraps of paper used then deposited by the vagrant patrons of Puraminda’s vindaloo emporium located in the back of a Delhi shanty and squatter area after they rush out to relieve their burning bowels over a pit especially dug for that purpose

    Is it all clear now

    Liked by 1 person

  7. I should point out to avoid confusion that the pit is especially dug to cater to the explosive relief of said burning bowels and not as a repository of the new world currency as someone queried due to the valuable nature of the pits paper content relative to the contents of your wallet.
    Discretion is advised should you seek to invest in such pits as investments can rise as well as fall

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  8. In response to Fred, we cautiously advise that investing in Delhi pits dug for the correct purpose is a safer bet for Japanese US or UK investors after ascertaining through specialist analysts of which hundreds can be found on Wall St, the City or Tokyo who have exceptional talents in locating the deepest and darkest pits for the shittiest of paper to offload on their clients, as to the exact paper content.
    All those in Europe should rush in head first disregarding any analysis and hope for the best

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  9. Kevin
    Thanks for this & sorry you got stuck in moderation. I have no idea why.
    It does highlight, does it not, just how different some agendas are…..

    Liked by 3 people

  10. The End will come if and when 1 : The world realises Central Banks are insolvent ( as long as they are allowed to print this should not happen ) or 2 : Central Bank printing is not enough to prop the markets .
    People forget that there are billions to be invested every year by pension funds , insureres and money managers and that this money HAS to be invested . Thus QE effectively squeezes this wave of money . Not only that but these investors have coupons / added value etc to re-invest every year so this sum rises . It’s a virtuous circle for the Central Banks .
    In the long run this will hurt Banks . Market activities become less profitable and more regulated . Margins decline and costs rise . Lots of job losses will occur and eventually Big Banks will swallow smaller banks and this the very rich will get richer , the economy will get smaller . A Trump win could be great .. a possible Black Swan event that set in motion the end of Central Bank / BIS hegemony .
    If Hiliary wins we’ll be having this same conversation in 5 years time .

    Like

  11. The End will come if and when 1 : The world realises Central Banks are insolvent ( as long as they are allowed to print this should not happen ) or 2 : Central Bank printing is not enough to prop the markets .
    People forget that there are billions to be invested every year by pension funds , insureres and money managers and that this money HAS to be invested . Thus QE effectively squeezes this wave of money . Not only that but these investors have coupons / added value etc to re-invest every year so this sum rises . It’s a virtuous circle for the Central Banks .
    In the long run this will hurt Banks . Market activities become less profitable and more regulated . Margins decline and costs rise . Lots of job losses will occur and eventually Big Banks will swallow smaller banks and this the very rich will get richer , the economy will get smaller . A Trump win could be great .. a possible Black Swan event that set in motion the end of Central Bank / BIS hegemony .
    If Hiliary wins we’ll be having this same conversation in 5 years time .
    Sorry didn’t mean to post anonymously .

    Like

  12. Making money in financial markets is easy because real economics has very little to do with it. You borrow cash at x-1% and lend it at X+1%. You book ALL future profits on the loan on day 1. You borrow more money. You pay out your “profits” from this new borrowed money. Buy a Porsche or is that passe? The big brains in accounting firms have OK’d this lunacy.

    However you have a problem as the borrower you made the loan to cannot repay – or may not be able to. No worry. Sell it onto to someone else – ie German investment funds – with an AAA sticker attached. of course not everyone is such a mug since 2008 so you may have recourse – ie some form of guarantee. So stuff it all off balance sheet along with the loan you made to borrow the money. This may not work out either so buy insurance cover – ie a bet to lay off the odds – called a derivative.

    What could go wrong? Well the person who took the other side of your bet – the counter-party – may not be good for the money, So they might lay it off too, along with their own bets on dodgy lending. Hell, if this goes on long enough you may found you are your own counter-party. And you wonder why DB has 80 Trillion $? derivatives on its books.

    As long as you can continue borrowing new funds, you can pretend to make profit and make cash payments to staff and investors and of course taxes. This is called a Ponzi, except in banking.

    Of course once you can’t borrow money the SHTF. 2008 et al. Which is which the central banks around the world are printing money like its going out of fashion. Which it is.

    Now I’m not saying that any particular % of DB’s (or any other banks’) derivative book is flakey. But a 1% loss rate is 80B, which even Germany might find hard to find. And I don’t buy the “set off matching” concept as every contract where someone wins must have a loss in the system – which is why it is called systemic risk. Add to that dodgy loans – c 15% to 18% in Italy for example and that is just what is being admitted – and you have a FUBAR. And guess who says whether a loan is bad or a derivative may be called in – that’s right – the management of the bank – who have no axe to grind one way or the other.

    How long can this go on? I’m really not sure and no one else is either. But like a crack addict, the system keeps printing money to recycle loans to feed the habit. Once the end of the road is reached, as it surely will be, the party is over. There have been loans made and associated derivatives written of epic volumes and with very tenuous lending standards – many to the governments. Once someone significant cannot pay them back the problem will start, and it will spread. Early warning signs will include LIBOR which is ominously going up just now. Zombie Bank Apocalypse.

    Central banks buying this manure to recycle the sh*te may work as far as government borrowing is concerned, but you can’t force individuals and businesses up to their eyes in debt to borrow more. Unless of course they are in the EZ, in which case the Germans will get the bill in the end. Assuming DB doesn’t go pop first.

    And I still can’t work out if Target2 is a problem or not – but assuming it is – the German tax payers may have been fleeced in the theft of all time.

    Rant over.

    Liked by 1 person

  13. @marcjf; I wouldn’t consider that a rant, more like a fact sheet, almost an instruction manual.
    But, as always leads to $64K question: How long can it go on? Oh for a crystal ball eh?

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  14. You know if I wanted to punish the people for voting leave I’d reduce bank rate by 0.25% to ensure the pound sterling tanks vis a vis other currencies, and then in a month or two when every import is costing more, and pension schemes are closing at a rapid rate of knots I’d blame it on Brexit.

    On the other hand if I wanted to support the pension’s industry, slightly damp down what has been until now a slightly overheating economy, I’d be advocating a 0.25% rise in bank rate (now a 0.5% rise made necessary by the latest cut).

    So who’s side is Mr Carney on?

    Liked by 2 people

  15. @stephenroi; ‘So who’s side is Mr Carney on?’
    The elite’s side, he’s just doing as he is told, as they all do. There seems to exist an all powerful clique who decide everything, we can all go along, or all object, it matters not a jot to them the end result is always the same.

    Liked by 2 people

  16. We have had socialism in UK Gems, but not your preferred National Socialism. We dont do German style socialism in the UK either and I agree the Germans do it better.

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  17. Sprinter, you know full well that National Socialism had nothing to do with socialism of any kind.

    It was American corporatism brought to Europe, courtesy of a lot of American corporate dosh.

    Liked by 2 people

  18. Huge 6% Collapse in PPI Services Final Demand for Apparel, Jewelry, Footwear

    Economists were shocked once again today. First, Retail Sales “Solidly” Flat, which we just covered.

    The Producer Price Index for Final Demand (PPI-FD) was the real shocker.

    Instead of rising 0.1% as expected by the Bloomberg Econoday consensus, it fell 0.4%.

    https://mishtalk.com/2016/08/12/huge-6-collapse-in-ppi-services-final-demand-for-apparel-jewelry-footwear/

    Liked by 4 people

  19. Retail sales were flat in July and for the last three quarters productivity has slumped yet the stock market is at a record level. Go figure.

    Liked by 1 person

  20. well for me thats really not a hard one,its the only game left in town,still some ft100 stocks paying good div,s by todays standards,

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  21. On the BREXIT point, we had the doom and gloom the world was going to collapse. What we got? UK TBTF

    mwhahahahahahahahahahahahaaha

    We are in a ridiculous world where none of the data adds up anymore that negative does not exist for the moment and if the UK had collapsed chances are then the rest would bust. It is the mechanism that in 2008 preserved the giant global banks and if any one had failed the rest would go. We moved up a gear though … not just banks now the TBTF nations are here.

    Few words … f%^king epic! For now just think if any one fails chances are the lot fails and failure is not allowed as it is the all in play on the poker table. Not even going to go into the no takers for Carney’s deal in the market but it does explain why he was granted the minimal amount. Failure to do this breaks the TBTF chain.

    Funny this joined up old world, if you failed to invest in Indonesia chances are you were fleeced a bit as insider trading picked that horse as the winner. So you all pile into Indonesia to make up for it, but to late the next chosen winner will be? Afghanistan well who would have thunk it? So ordinary investors are fleeced yet again.

    This is the true state of the markets, fundamentals have been done away with and pure speculative casino gambling is on offer. Now take out £100 and pop off to the casino next week, win or lose enjoy yourself, same odds the banker wins.

    Liked by 2 people

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