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The Nature of Panics
I have been asked my “opinion” with respect to the existence of a Collective unconscious in terms of the Carl Gustav Jung (1875 – 1961), who disagreed with Freud and believed his personal development was influenced by factors he felt were unrelated to sexuality. Nevertheless, Jung’s work has led to many considering it to be a form of collective unconsciousness that exists whereby we are all connected somehow and respond in a herd manner.
I really have no opinion on Jung’s work. Nevertheless, there is clearly a sort of collective unconsciousness that comes into play creating panics. I tend to see it more as a herd of zebra. They are all clustered together and one on the fringe of the herd sees a lion approaching. He starts to run and the others all panic and run as well without knowing why nor did they see the lion. They run because everyone else is running. This is the same thing that dominates a panic in markets. At the end of the day, everyone sells because everyone else is selling. There is usually no solid reason that can be asserted as a fundamental.
Prepare For “Manias, Panics And Crashes”: An Ominous Warning From Bank Of America
Prepare For “Manias, Panics And Crashes”: An Ominous Warning From Bank Of America
Bank of America’s Michael Hartnett is back with another controversial note overnight, reminding readers that “it ain’t a normal cycle” for one overarching reason: central banks.
As Hartnett explains, the catalyst for bull in equity and credit markets since 2009 was the “revolutionary monetary policy of central banks” who, since Lehman, “have cut rates 679 times and bought $14.2tn of financial assets.” And, once again, he warns that this central bank “liquidity supernova” is coming to an end, as is “the period of excess returns in equities and corporate bonds, as is the period of suppressed volatility.”
Demonstrating how insane just the past year has been in markets, Hartnett reminds us that just eight months ago belief in debt deflation & secular stagnation induced lowest interest rates in 5000 years.
- On July 11th 2016 Swiss government could have issued 50- year debt out to 2076 at a negative yield (of -0.035%)…
- …and in 1989 the Imperial Palace in Tokyo worth more than all real estate in California…
- …and in March’2000 the market cap of Yahoo was 25X greater than market cap of Chinese equity market (MSCI)…
- …and in 2008 the combined assets of Iceland’s three biggest banks were 14 times the size of the nation’s GDP…
- …all manias, all over now.
While the current mania almost ended in early 2016, it was once again China that was responsible for the latest leg higher:
…click on the above link to read the rest of the article…
