Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Stock Market Volatility Grinds to a Halt

Stock-Markets / Stock Markets 2014 Jun 13, 2014 - 02:25 PM GMT

By: Alasdair_Macleod

Stock-Markets

There is uneasiness across a number of markets with moment-to-moment volatility grinding almost to a halt. It contributes to a feeling that this is the calm before a storm. It is not unusual for there to be a summer lull, or for one market to suffer disinterest relative to another, but the current situation across the whole range of capital markets should be a major concern.


The monetary background is also unprecedented, with all western central banks having depressed interest rates to close to zero for a prolonged period, accompanied by massive injections of raw money. This has led to enormous amounts of liquidity bottled up in capital markets. Central banks have also directed how this liquidity is invested: this is what the Fed’s Operation Twist is about, raising long maturity bond prices relative to shorts. And the ECB’s “Securities Markets Programmes” and “Outright Monetary Transactions”, which have succeeded in driving risk premiums out of Eurozone government bonds.

Manipulating bond markets and driving perceptions of risk out of them is only the start of deliberate intervention. The belief in central banking circles is that rising stock markets foster the confidence that gets consumers spending again. Falling bond yields are seen as the motor that drives this process. And as interventions have become more widely understood and accepted, investors have complacently concluded markets are solidly underwritten.

Central banks also know that a rising gold price undermines confidence and so have taken action to keep it suppressed. We know this from the enormous flows of physical gold into Asia that can only have come from liquidation of monetary gold. So it’s bull up the good stuff and dumb down the bad.

Market distortions from interventions have been accumulating since the Lehman crisis in 2008, moving ever further away from the path of market reality. Inevitably, private sector investors add to these distortions by anticipating they will continue. Banks and investment funds feel safe investing in Spanish and Italian government bonds at ridiculously low yields knowing that the ECB must underwrite them. Similarly, so confident are investors in US stocks that they are borrowing to buy and have driven up total margin debt on the NYSE to a near record level of $437bn in April. And at the same time these confident investors have taken short sales of gold and silver to new levels.

Cracks in these market distortions are now becoming visible. Regulators are circling around the banks: first it was Libor, now it is forex and gold. The Fed is backing down on QE and China is trying to slow the pace of credit creation, while Japan and the Eurozone are still fighting economic collapse. It amounts to a reality-check for over-extended investors committed to making money out of on-going market intervention. No wonder volatility has slowed to a crawl, and diverse markets are on the point of stalling.

History tells us that attempts to manage markets usually result in crisis, and that time now appears horribly close. If so, the consequence will be a radical reassessment of bond risk, leading to widespread losses in the banking system and the rapid reversal of extended investment positions in a range of markets. Volatility will disrupt complacency and return with a vengeance.

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2014 Copyright Alasdair Macleod - 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.

Alasdair Macleod Archive

© 2005-2019 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