Thursday, July 14, 2016

Dow, S&P Post New Highs Again, But, Who's Doing The Buying?

In a market that more often resembles a three-ring circus than an amalgamation of the best corporate entities vying for favoritism among investors via increased earnings, revenue and expectations, the recent melt-up in US equities has more than just a few analysts scratching their quickly-balding heads.

It's widely known that equity mutual fund outflows have been more or less continuous for the better part of the past four months, a trend that doesn't seem to be abating, despite the recent runaway rally.

So, with mutuals (institutional investors) out of the picture - and they're a huge part of the landscape - and individuals mostly too scared to tread too deeply into the Wall Street morass since the devastation of the 2008 washout, there aren't many places from which the money to buy up all these loose assets can come, except, of course, if you're the operator of a central bank, such as the Bank of Japan, the ECB or the almighty Fed.

For verification of the central bank buying conspiracy theory (now fact), we turn to the erudite and educated Zero Hedge, which puts the matter to rest in no uncertain terms in his recent post, "Mystery Of Surging Stocks Solved—-It’s The Central Banks, Stupid!"

The Hedge cites Citi's Matt King, who publishes a must-see chart of rolling central bank asset purchases, and there for all the world to see are egregiously large buys by Japan and the ECB.

Yep! Those shifty Asians and super-smart Europeans are buying up US equities at valuations measured at a median rate of 24X. Good for them! When they awaken from their Keynesian stupor somebody must announce to them - they being economists, not investors - that the goal is to buy low and sell high, not the other way around.

Their rude awakening will coincide with the complete financial and societal implosion of their economies and their sovereignty, which, in the case of Europe, has been questionable for at least a couple of decades, and, for Japan, is only a matter of time before demographics and deflation tear the country to shreds.

What the world is witnessing (or not, depending upon how many people are playing Pokemon Go at present) is the beginning of the final phase of complete totalitarian financialization by central banks and their appointed henchmen, which will result in hemorrhaged debt defaults by individuals, corporations, and eventually (but maybe initially) governments.

Unlike people and companies, governments have a unique advantage in that they can run deficits and debt in piles as high as the moon without recourse for the most part, until, that is, the general public and business people have enough of higher taxes, worsening living conditions and runaway inflation.

Central banks are even better off, being the enabler of all debt and fiat folly via their ability to print endless scads of fiat money literally out of thin air.

Both groups, the money-makers and the politicians, are parasites, and they are killing the host, that being the good-will and capital of citizens and businesses, burying them in debt that will never be repaid.

Hope for a debt jubilee has reached new heights with the latest round of stupidity, but it is far from over.

The shackles which bind the citizenry and businesses to debt and drudgery, taxes and regulations, will tighten before they are broken.

New all-time highs are great when people and funds are doing the buying. That's a sign of a growing, robust economy. When it's central banks doing the heavy lifting, it reeks of desperation and failure.

Enjoy it while it lasts.

-- Fearless Rick

New Highs! Get 'em while you can!
Dow Jones Industrial Average
18,506.41, +134.29 (0.73%)

5,034.06, +28.33 (0.57%)

S&P 500
2,163.75, +11.32 (0.53%)

NYSE Composite
10,786.63, +52.43 (0.49%)

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