The Market Bull – January 10, 2019
With the political situation turning increasingly acrimonious both here and abroad. The major averages continue to attempt a rally following their recent drubbing ending a volatile day with modest gains on little economic data.
Given that 2018 was the worst year for the major averages in the last 10. This despite a trillion Dollar plus debt funded tax cut, record debt funded corporate share buy backs, and just plain old record debt. Because it either is or dam close to it just about everywhere you look. It’s no surprise that the grossly overleveraged and overvalued markets did their late 2018 swan dive. But it is the future, or specifically where to from here that is the critical question. Each time the markets faltered in the past 10 years central banks and the Federal Reserve stepped in to provide support, and from the looks of things I’d say their doing it again.
Because the reality on the ground is that the major averages haven’t shown any organic growth since at least 2015 and one could argue considerably longer than that. When markets tumbled in 2015 and 2016, global central banks embarked on the largest combined intervention effort in history. The sum: More than $5 trillion between 2016 and 2017, giving us a grand total of over $15 trillion, courtesy of the U.S. Federal Reserve, the European Central Bank and the Bank of Japan. In fact it is quite clear in the post crisis period that Central Banks the world over have ridden to the markets rescue time and again. The problem is that this can’t go on forever as sooner or later the Piper has to get paid. The longer the day of reckoning is delayed, the higher the price will all have to pay.
Standard and Poors 500 Index closed at: 2,596.64 up 11.68
NASDAQ finished the day: 6,986.07 up 28.99
Gold ended trading at: $1,287.30 down $4.70