Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Could A Big Move In The Global Stock Markets Be Setting Up? - 25th Jun 18
Soybean Price Hits 9 Year Low Due to Trade War - 24th Jun 18
Small Cap Stocks, Technology and Pharma To Drive A Renewed Market Rally - 24th Jun 18
Gerald Celente: Why You Still Need Guns, Gold, and a Getaway Plan... - 23rd Jun 18
Cheap Gold Stocks Bottom Basing - 23rd Jun 18
A Trade War Won’t Be Good for the US Dollar - 23rd Jun 18
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Where Would Stock Market Be Without Fed Intervention?

Stock-Markets / Stock Markets 2012 Sep 12, 2012 - 12:26 PM GMT

By: Graham_Summers

Stock-Markets

Best Financial Markets Analysis ArticleWe’ve entered a truly dangerous environment in the financial markets.

Economic fundamentals are deteriorating rapidly. Consider the US…

By all counts, the latest ISM (a measure of manufacturing in the US) was a complete and total disaster. In August the ISM hit 49. Anything below 50 is considered a recessionary rating.


However, things are even worse below the surface. The ISM is made up of several components. Its Production component is back to May 2009 levels. The New Orders component is back to April 2009 levels.

And worse of all, Prices Paid is up to 54, up from a reading of just 39 in July.

In very simple terms this tells us that inflation appears to be hitting “lift off” in the US at the very same time that we are entering another recession that could potentially be on par with that of 2008. And with corn and soybean prices at or near record highs, we could be on the verge of a stagflationary disaster combined with a food crisis at the very same time.

We get additional confirmation of a major economic contraction from corporate earnings. Recently we’ve seen earnings forecast cuts from Fed Ex, Bed Bath and Beyond, Proctor and Gamble, Adobe, Starbucks, McDonald’s and more.  Indeed, when you remove financials, S&P 500 earnings FELL year over year for 2Q12.

This is hardly indicative of a strong economy. The fact a record number of Americans are on food stamps doesn’t bode well either. And the Rasmussen Employment Index indicates worker confidence is at levels not seen since the FALL OF 2008!

Against this backdrop, stocks have rallied higher and higher on hopes of more liquidity from global Central Banks. As a result, the market has completely disconnected from underlying economic realities. Based on the business cycle alone, the S&P 500 should be closer to 1,000. And even the NY Fed has revealed that without the impact of Fed meetings, the S&P 500 would be at 600!

This is a truly staggering admission from a Fed official. This is the Fed admitting to us, point blank, that without investors trading based on hopes of Fed intervention, the markets would essentially be even lower than they were in March 2009.

Again, this is a truly dangerous environment. Because if investors lose faith in the Fed or ECB, then it’s GAME OVER. This process is definitely already underway already as the impact of each successive intervention by a Central Bank is having a shorter and shorter lifespan.

I cannot say when exactly the Central Banks will lose control of the markets. But we’re not far from it. Some major takeaway items you should consider:

1)   The Fed will likely be dismantled or restructured in the coming years. It’s clear from various dynamics that some Fed Presidents are positioning themselves to replace Bernanke if Romney wins. Moreover, even former Fed Presidents are admitting they’re concerned about the future of central banking.

2)   Politicians, worldwide, have proven incapable of implementing real fundamental fiscal reforms (all the talk of “austerity” is a lie as few if any countries have begun a serious process of deleveraging). Central Bankers are beginning to catch on to this game and are increasingly blaming politicians for the fact the Crisis has yet to be resolved. Look for this relationship (between Central Bankers and politicians) to continue to deteriorate with serious consequences.

3)   Europe will be the first area in which the “End Game” hits. We’ve just had the promise of “unlimited” bond buying. In terms of verbal intervention, you cannot go any further than this. When this promise turns out to be a bluff (see yesterday’s article for why this will prove to be the case) then the markets will crater.

I give this last item perhaps a month or so before it takes hold. Unless Germany completely changes and goes along with the idea of Eurobonds (unlikely given that it violates the German constitution and would cost Angela Merkel her bid for re-election in 2013), then the ECB is essentially out of bullets. You cannot say “unlimited” and bluff about it. And the ECB is doing nothing now but bluffing.

Those investors looking for actionable investment ideas could also consider our Private Wealth Advisory newsletter: a bi-weekly detailed investment advisory service that distills the most important geopolitical, economic, and financial developments in the markets into concise investment strategies for individual investors.

To learn more about Private Wealth Advisory and how it can help you navigate the markets successfully…

Click Here Now!!!

Graham Summers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2012 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules