Do Any of the Current Rallies Pass “The Sniff Test”? No.
But you can’t tame the monster of speculative, legalized looting and financialization.
Everything from iron ore to copper to the Baltic Dry Index to stocks to bat guano is rallying. The problem is not a single rally passes “the sniff test:” is the rally the result of changing fundamentals, or is it merely short-covering and/or speculative hot money leaping from one rally to the next?
Every one of these rallies is bogus, a travesty of a mockery of a sham of price discovery, supposedly the core function of markets. What shift in fundamentals drove this rally? Higher profits? No, profits are declining, especially once the phony adjustments are stripped away. Is the global economy strengthening? Don’t make us laugh!
As Chris Martenson and many others have noted, “price discovery” is a joke now, as markets are either propped up by central bank “we got your back” guarantees or outright asset purchases, or driven up and down by speculative hot money flows.
Even the recent (and overdue) run-up in gold has a speculative-fever feel. Whatever the market, the game is the same: traders goose the markets higher with futures purchases, pile on with buying that attracts latecomers, who are then sold the rally at the top and left holding the bag when the rally inevitably deflates, once the speculative hot money exits.
This is not capitalism, or a functioning market: this is the end-game of legalized looting and financialization. What’s the value of real estate? If interest rates are pushed negative, then that gooses housing demand, as the cost of interest on a mortgage declines to near-zero in real terms.
What would the value be at 5% mortgage rates? What would the interest rate be in a truly private mortgage market, one that wasn’t dominated by government agencies and central banks? Nobody knows.
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