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Trading Lessons

There Are No Markets Anymore

Stock-Markets / Market Manipulation May 15, 2014 - 02:51 PM GMT

By: Raul_I_Meijer

Stock-Markets

It’s a fun day in finance so far today. Eurozone growth is not going anywhere, but there’s no lack of positive anticipations for the future. Is there ever? Q1 GDP in the Netherlands actually shrank to the tune of -1.4%, but they have a great explanation for that. It’s because of – drumroll, wait for it – … the mild winter! The weather can be used to explain anything and everything these days. Where the US economy was hurt by a harsh winter, the Dutch went down because their winter wasn’t harsh enough.


The reasoning in the burbs of Amsterdam is that both exports and domestic use of natural gas was, what’s that word, tepid, and at face value that sounds sort of acceptable perhaps, but why didn’t the US economy get a boost then from additional heating costs, instead of being hurt by them – or so they say -. And if Americans didn’t go out to buy cars and homes because of the cold, wouldn’t the Dutch have done just more of that in their mild winter?

The Bank of Japan yesterday was good too: it warned against an El Niño this year cooling the weather, which allegedly will cut spending. Japan Q1 GDP was up by 1.5% yoy, but there’s not much faith left in the rising sun: the Nikkei lost 0.75% (-12% for the year) on the good news (like the Dutch markets are up on their bad news), and NLI senior economist Taro Saito was quoted as saying: “We expect the economy will contract at an annualised rate of around -5% for April-June” He did add it might grow back a bit later in the year, but still. Ouch.

Reuters has a piece about how the Japanese working poor are getting hurt by Abenomics, and that’s no wonder since it’s based on ye olde trickle down theme, and I don’t swallow for a second that Abe doesn’t know what that means. He wants consumers to spend just because they believe Abenomics will work, not because it actually does, but he knows Japanese don’t think like that. Meanwhile, his banks – for the umptieth time in the past 20 years – just got a desperately needed credit buffer. A job well done. Wonder what the BOJ will come with when that El Niño never materializes and the economy still keep on crumbling.

In line with my article yesterday on the developing disaster that is the Chinese economy, David Stockman does one better, and says China’s not even an economy, just a “monumental building aberration”. Now we’re talking. “China is a grotesque economic aberration that bears no relationship to prior economic history or any conventional economic models ..” Even TIME Magazine joins the fray now: “You know a property market is in trouble when developers stage long-jump contests to attract buyers.”

China’s one of the main reasons – Russia’s the other – why Steen Jakobsen at Saxo Bank foresees a major slowdown in Germany. And if you combine that with the disappointing eurozone Q1 numbers, held above zero only by Germany, then what do you see? Well, one thing is that in a week, the 3-day European Parliament elections start, and there’s a fair possibility that anti-EU parties get such a big chunk of the votes, there will have to be serious discussions about what the European people want, not just the ‘Europe is good, more Europe is better’ “visionaries”.

And if you ask the people, there’ll be very few who want more Europe. They just have no other way, except in Italy with Beppe Grillo’s 5-star movement, to express that than through voting for fringe parties with often questionable ideas. The entire ‘normal’ political spectrum, from left to right, all have the same basic message: Europe is good for you, more Europe is more good. Which is a strange way to run a democratic system, and down the line a dead end one.

And of course nobody’s surprised anymore that bad news causes a stock market to rise, and good news leads to falls. That lack of surprise is just one of many signs that we don’t have markets anymore, that they no linger exist other than in name. And that can seem merely semantics, but let’s have that conversation. Stock markets are places where someone who has done work, who has added value to something through his labor, after providing for his own food and shelter can invest what’s left over in shares of a company that does the exact same thing: add value to something through work. In a company’s books and ledgers, an investor can see if the company’s doing well. If so, he gets some dividend, if not, he may lose some of his investment, sell the stock, and invest elsewhere.

Of course there may be people who inherit the money they invest, but by and large the model stands. Except that it doesn’t look at all like what are called the markets today. Where for instance the S&P can set records despite a still severely limping US economy. Where 40% of trade goes through HFT desks. Where stimulus freebies prop up everything, and nobody says anything as long as they too can feed on that trough. Where a company’s shares may have nothing to do with its performance when it comes to added value in its products, and often indeed does not.

It’s the Tulip bubble redux, and we all know how that went, but nobody says a thing as long as there’s a buck to be made. That this buck will have to come from the working poor, who get hit everywhere in the same fashion as Japan’s working poor are through Abenomics, nary a moral objection is heard about that. A buck in the hand today is worth more than a functioning economy down the line. Or so people seem to think.

If you say that you can’t solve a debt based problem with more debt, other than perhaps at low debt levels -which we certainly don’t have -, most will understand and agree. If you say that’s exactly what is being done right now all over the world, most will neither understand nor agree. There’s a belief in magic factor that plays a role in that, but there’s also the ‘buck in the hand today’ one. A belief that somehow this will end well trumps our logic, and that allows us to give way to greed over common sense, over the notion of leaving behind a better, let alone just simply functioning, world for our children. By the time we hand it over to them, there’ll be nothing left but zombie markets ruled by zombie banks reigning supreme over a zombie economy in a pool of miserable desperation. We’re laying the foundations for that today.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - 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.
Raul Ilargi Meijer Archive

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