“Bubbles are far more dangerous when they are fuelled by debt”
“This time it’s different”, is one of the most dangerous beliefs in financial markets. This time, things are different – but for a reason. Global Central Banks have pumped liquidity into the financial system to support the global economy as it struggles with a toxic economic shock of unprecedented scale. This may surprise some market participants, but they did not do it to pump stock markers and bond indices to stratospheric levels. They are doing it to save jobs, keep companies afloat and keep society stable.
Markets are indifferent to such concerns. They care about “up”.
The liquidity effect has generated the market momentum that’s driven the rally since March 23rd– not fundamentals. It’s like watching moths being drawn to a flame. You just know this can’t last, and the bear trap is going to slam shut at some point. Questions are when and if ever? There are articles about big institutions quietly exiting Amazon, Apple, Alphabet, Facebook et al… there are tabs explaining how over 500,000 RobinHood accounts have bought Tesla in recent weeks, there are stories about insider selling.
Never forget Blain’s Market Mantra No 1: “The Market has but one objective; to inflict the maximum amount of pain on the maximum number of participants.”
When the American’s are chucking China out of Houston, and worse, the Chinese are taking English Premier Football off the TV (which is actually going to prove highly significant for some clubs), you know the world is really changing. Central Bank action is central bank action. A new Cold War is fundamentally serious…
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