Disconnect: Soaring Markets/Troubled Economies

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Stephen Lendman
Activist Post

Forget everything you learned about markets, economics and finance. Perhaps Newton, Galileo, Copernicus, Darwin, Freud, Einstein, and other noted figures were wrong.

Central banks run today's world. Major ones matter most. Money printing madness controls everything. Love doesn't make the world go round. Liquidity-driven markets reflect the power of bankers to do it.

They're more powerful than standing armies. They can levitate markets. They can enrich themselves at the same time.

They can do it while economies crater. The power of massive liquidity infusions combined with market manipulation generates huge profits.

What can't go on forever, won't. What's going on now defies reason. Disconnect barely explains it. US equity markets hit record highs. So did Germany's DAX. Japan's Nikkei reached a five and a half year high.

One recent headline read "Central banks pop champagne corks as stock markets soar." Another said "Which European Market Will Hit a Record High Next?"

Turkey's BIST-100 topped 91,000 for the first time. Switzerland's SMI has a ways to go. It's headed in the right direction. Sweden's OMX Stockholm 30 and the OMX Nordic are closer.

London's FTSE 100 looks poised for a record high. It could do so in weeks. Who said defying gravity's impossible? Markets are doing it with ease.

Bruce Kasting worked on Wall Street for 25 years. He's no longer there. His blog site discusses financial issues. He calls Bernanke's policy "reckless endangerment."

He claims he can cease QE with no ill consequences. "It’s never been done before. Not by the Fed. Not by any Central Bank."

"To think that such a daunting task can be accomplished without negative consequences is foolish," said Kasting.

PIMCO's Bill Gross sees bubbles everywhere. It doesn't mean they'll pop immediately.

Speculators assume Fed policy will remain accommodative "over the long-term and under the assumption that the US economy is doing better than most economies."

Lots of money is chasing lots of risk, says Gross. Central banks are "blowing bubbles. When that stops, there will be repercussions. Not just in the bond market but in the stock market as well and a developing one in the hous(ing) market."

Gross warned that the multi-decade US bond bull market ended. Higher interest rates will eventually follow.

A 1% rise means over $100 billion in more interest. It's negative for economic growth. Most developed countries have debt to GDP ratios above 100%.

They're manageable with record low interest rates. Higher ones risk default in troubled economies. European PIIGS countries are most vulnerable (Portugal, Italy, Ireland, Greece and Spain).

Marc Faber warns that "something will break very badly."

In the 40 years I've been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality. 

Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.

Graham Summers warns "It's official: Stocks are in a bubble." It's worse than anything he's seen in his career.

Stocks rallied every Tuesday for 17 straight weeks. Traders "are now conditioned to play for this move."

It's "POMO day." The Fed pumps markets with liquidity. Doing so drives stocks higher.

The market is beyond overstretched. We have not had a 5% correction in six months. Stocks have gone almost straight up for 89 days (we haven’t had a 3+day correction in that long). 

This is an all time record. The last time stocks rallied without a 3+ day correction was in the buildup to the Crash of 1987."

"Copper is great at predicting economic growth." It's trending lower. Stocks are poor predictors. Major divergences between them will be resolved sharply.

Rampant insider selling continues. Stocks are disconnected from reality. They're "totally out of control." Most days hit record highs. It's unprecedented.

At this point, no long term investor in their right mind should be buying. This is especially true given that the S&P 500 is now not only totally disconnected from economic reality, but is disconnected from every other asset class.

Stocks diverged from bonds, gold, copper and oil. They're last to react. "This bubble will end as all bubbles do: in disaster."

Main street conditions are worse than during the Great Depression. Europe's as disconnected as America. More on that below.

Paul Craig Roberts calls offshoring US jobs a greater threat than terrorism. It's been ongoing for years. It's most felt when jobs are scarce. Good ones are fast disappearing.

Politicians remain in denial. Millions more jobs remain vulnerable. Displaced employees "left unemployed or in lower paid work have a reduced presence in the consumer market."

Outsourcing jobs erodes US economic strength. China, India, Brazil and other developing countries gain at America's expense.

Instead of using the nation's resources for economic growth, Washington prioritizes militarism, permanent wars, and corporate giants' interests at the expense of ordinary people.

It's madness. It's self-destructive. It sacrifices long-term economic health for short and intermediate term gains.

WW III already started. So far, it's unlike WW I and II. It's international, unconventional, asymmetric, disruptive, anti-democratic, lawless, low to higher intensity, political, psychological and financial.

Financial schemes involve:

• massive wealth transfers from ordinary people to corporate giants and super-rich elites;
• bail in confiscation of assets;
• lawless sanctions, embargoes and blockades;
• schemes to control natural resources, trade and money;
• entrapping nations in unrepayable debt;
• manufacturing financial crises, and more...
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