The state of today's market is very well known to attention paying market participants or bears. So much so that most investors would argue that it is incredibly easy.
The FED and other central bankers around the world have pumped a tremendous amount of "out of thin air" money into the system, leading to speculative run ups in nearly all asset classes. With most spectacular gains occurring in the stock market. This is very well summarized by the chart below.
What's more, most investors today would argue that the fact that Central Bankers have been so successful in the past can only lead to one conclusion. They will not let this market implode, no matter how high the valuation levels get. Also know as, buy the dip.
Not only that, should a correction occur, the FED will immediately flood the system with QE 4 and negative interest rates. Leading to yet another massive run up in all asset classes. This is the view expressed here.....
And today, we find out that once again, derivatives are at the root of the current bubble (debt). And once again, the Central Banks will be cranking up the printing presses to paper over this mess when the stuff hits the fan. Already, Central Banks are printing nearly $180 billion per month in QE. When the next crisis hits, it’s going to be well north of $250 billion if not $500 billion per month. This is going to send inflation trades, particularly Gold, through the roof.
And that is exactly what most bullish investors are banking on today.
Yet, as the article states, "Assumption Is The Mother Of All F*** Ups"
Meaning, just because the scheme above worked nearly flawlessly in the past, doesn't mean it will not backfire in the future. That is the primary point I wish to drive home.
Let me give you an example. Let's assume recession hits and the S&P drops 25%. The FED announces rate cuts and QE 4. Yet, the bond market doesn't respond. Instead, yields and the dollar surge higher. Game over and checkmate. Any such collapse would simply accelerate lower.
Impossible? Again, don't think in a linear fashion most investors apply today.
If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.