Forget about fundamentals in today’s global stock, currency or commodity markets. Today, Central Banker manipulation is the most tradeable factor in the market. Over the past several years, banker manipulation has created situations in which stocks that should be tanking in price magically levitate in price and stocks that should be soaring in price mysteriously tank in price. Simply put, if you trade strictly on fundamentals, you will get burned the vast majority of times. For example, consider Tesla’s stock price ramp up of 36% in just three trading days last month that crushed shorts, simply because Tesla reported a quarterly profit, literally just one of four quarters it has been profitable during its 37 quarters that it has publicly traded. However, though Tesla did not start publicly trading until mid-2010 it was incorporated in July 2003. Consequently, in 65 quarters of existence, Tesla has had 4 quarters of profitability and 61 quarters of losses, yet the market manipulation that exists in today’s US stock markets is so massive that any positive news, even the slimmest of positive news, can often by used by traders to send stocks soaring in undeserved proportions to the news. Though its latest quarterly earnings report declared its largest profits ever and perhaps this was the reason for the irrational exuberance manifested in its stock price, Tesla’ CEO Elon Musk declared at the end of 2018 that Tesla had finally turned the corner on its perpetual run of losses for 15 ½ years and that it would be profitable for “all quarters going forward”, and thereafter promptly declared losses for the next two quarters. Consequently, the Q3 2019 profits should not be taken as an omen of things to come prior to management’s ability to demonstrate that it can meet forward projections, and if you don’t think that banker manipulation of Tesla’s stock price, based upon short term price bets that existed, were not largely responsible for the rapid extreme upward movement in Tesla’s stock price, then you simply put too much credence about what you may have perhaps learned in business school regarding stock market price behavior.
For the past few months, I have issued warnings about serious red flags that illustrated the fragility of the state of the global financial system and the massive instability that is a systemic problem within the global financial system. However, I see almost no worry or concern, and a level of complacency that is on par, or perhaps even exceeds that which preceded my last prediction of a coming US stock market crash in 2008. It is almost inconceivable that the level of complacency and the attitude that “everything is okay” with the global financial system persists among the majority of citizens in developed nations today, especially given the fact that everyone already has experience with a major financial crisis a little more than a decade ago. Undoubtedly, part of the reason for this complacency is the expansion of Central Banking powers since the 2008 crisis that now enables them to take actions similar to the ones that undertook during the 2008 crisis in greater secrecy and the willingness of the mass media to be complicit in not informing the public of the severity of the cracks in the global financial system that have been showing for a long time now.
Nine years ago, I wrote about the despicable behavior of the owners of the Sampoon super mall in Seoul, Korea, that included cutting corners regarding engineering structural integrity to save money during construction that eventually led to its collapse in 1995 and the deaths of 502 innocent people and serious injuries to nearly a thousand more. However, prior to the Sampoon mall’s complete collapse, many red flags appeared, including large visible cracks in the walls and even the persistent sound of creaking as the mall’s steel columns were not wide enough to support the weight load, in the days that preceded the collapse. Yet, despite all these visible signs of imminent collapse in the interior, because the exterior of the mall remained shiny, modern and beautiful, the mall’s patrons completely ignored multiple red flags and continued to patronize the mall despite multiple warning signs to stay away. Likewise, I have issued multiple red flags, right here on this blog in the last few weeks, and yet I don’t observe any sense of urgency to exit the global financial system, even though the red flags keep multiplying every week. For example, there have been multiple bank runs in China and India already this year, with the latest Chinese bank suffering a bank run last week being Yichuan Bank, with hundreds of customers waiting in long lines for hours to withdraw their savings for fear of losing it all. As can be expected, the normal reaction to such news by citizens of developed nations is something akin to “these are small banks with zero discipline mismanaged in nations with inadequate regulations, but those types of problems will never manifest in my nation.” And these types of false sentiments persist because of the fact that bankers in developed nations have influenced the mainstream media to the point where the mainstream media plaster and paint over the cracks instead of exposing them and warning the public.
For example, in this article I wrote on my blog just about a month ago, I stated that the reintroduction of the US Central Bank repurchase agreement program to provide overnight liquidity to US banks for the first time in eleven years was a clear sign “that there is something seriously and operationally deficient within the US banking system.” The very fact that the Central Bank needed to step in to provide cash needed for daily operations in the US banking system because banks do not trust one another to loan large amounts of cash and have it returned within 24 hours is a sign that multiple bank runs are possible due to large amounts of risk inherent in all of the largest US banks. In other words, banks will assess whether or not to lend money to each other, on an overnight basis, based upon the level of risk of receiving the loaned money returned to them within 24 hours. If they feel the risk exceeds the interest charged, they will not lend any money, which causes a liquidity crunch, and the need for Central Bankers to step in to create hundreds of billions of dollars out of thin air every week just to keep the US banking system afloat and operational. Thus banker manipulation across all aspects of the global banking system exists, and banker manipulation does not just pertain to stock markets.
Another way to look at this situation is to consider if a friend asked to borrow $20 from you because you were hanging out at a bar and he did not want to go to an ATM but wanted to have a couple more beers. The friend asks you, with the stipulation that he promises to pay you back tomorrow because you both live in the same condominium and he will knock on your door after work and return your $20. Whether or not you decide to lend him the $20 is based upon your judgment of his ability to actually pay you back tomorrow. If you decide that there will be no problem, because you know he has a job and is financially solid, then you would not hesitate to lend him the $20. The fact that US banks are not lending each other this $20 note should obviously point to serious problems in the US banking system. Furthermore, given that US Central Bankers purchased $341.57B worth of short-term securities last week in overnight repurchase agreements to provide an infusion of cash into the US banking system, combined with executing an additional $283.57B of term US Treasury bill repurchase agreements to provide more than half a trillion dollars of liquidity to the banking system, any logical person would interpret these programs of liquidity to indicate serious problems within the US banking system. To provide you with an idea of the scale of this operation, at the current time, an estimated 60,000 people are considered to be homeless in Los Angeles. Some city planners have estimated that the initial sunk cost to provide shelter to all 60,000 people to get them off the streets would be $657 million, and thereafter cost $354M to run the shelter program annually. Last week, the US Central Bank provided an average amount of $125B of liquidity per day to US banks in order to keep them operational, or 190 times the amount it would cost per year to get every single homeless person in Los Angeles off the streets, and 354 times the amount it would cost per year to keep them off the streets.
History has already informed us that banker manipulation charades can cover up cracks for an irrationally long period of time. However, history has also informed us, that when such cracks appear with such enormity as a consequence of perpetual banker manipulation of markets, whether overt or secretive, eventually Humpty Dumpty will fall off the wall and shatter into pieces.