But on the surface, stocks still look hunky-dory.
It’s amazing how individual stocks, at the tippy-top of the biggest stock market bubble in modern times, are getting taken out the back one by one to be crushed, but without denting the overall indices all that much.
The stock market bubble was driven by $4.5 trillion in QE in the US alone, along with many more trillions by other central banks, and it was driven by interest rate repression, even has inflation has been surging to multi-decade highs, not just in the US but globally, and not just in goods, but now also in services, particularly housing, such as rents.
After a decade of QE being relatively benign on the inflation front, giving central bankers a false sense of confidence, it has finally broken the dam, and inflation is now surging everywhere, and it’s spreading across the economy.
Central banks are now no longer denying it, and some have raised rates, and others have ended QE.
Even the Fed, which engineered this money-printing orgy and is very slow in ending it, is now ending it, and it will be raising rates, and everything is moving faster than expected, and suddenly the orgy is over.
Each stock that crashes has its own story for the crash. What they have in common is that they were all ridiculously overvalued, and investors knew it, and they kept hanging on till the last moment to ride them up all the way, but they were sitting all bunched up near the exits, and when the signal came, they all rushed out together, causing those shares to collapse. But even at those much lower valuations, those stocks are still ridiculously overvalued.
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This past week we got to observe Fed Chair Jerome Powell and the US stock market andthe US bond market do everything I said they would do in their complicated shuffle of ships-and-icebergs:
