As my readers have noticed I have been quite reserved lately other than commentary with some others on the inside and in private regarding the market shenanigans under way now. Today was the first day where volume started to pop on the NASDAQ above the norm and could quite possibly be the first of many negative market days before Thanksgiving. The breadth is so poor some are calling this a historic drought of faith in the efficiency of the US equity markets that the public engages in as the dark markets absorb even higher trading volumes allowing insiders to escape what we witness on the tape.
There is precedence for a bear market rally before a financial crisis appears. In 2007, a certain gold man sacks of Federal Reserve members allegedly engaged in some insider trading taking advantage of a “leak” concerning Ben Bernanke’s August 2007 speech which killed the shorts and created a strong rally into year end. But don’t worry ladies and gents, there is no evidence that the insider trading at the Fed now under Jay Powell would ever let that happen again; right?
Currently, the Fed Juice is running out, perhaps deliberately, perhaps out of ignorance of history.
Let us fast forward to 2018, another interesting period where Insider Trader extraordinaire Powell just became his own hedge fund manager:
The difference this time from 2018?
The American economy did not have embedded systemic inflation which could and probably will result in a decade of highly variable stagflation. Thus the Fed has to hold rates or surrender control of the war on inflation and the currency’s ability to resist mass liquidation. Since the Fed will not begin real inflationary measures to obfuscate the levels of fiscal irresponsibility and banking incompetence until the very last minute in an election year, the odds are a limited, yet terrifying deflationary scare will hit as banks begin to feel the impact of commercial real estate defaults accelerate into year end.
This time Santa Powell just may not arrive on December 24th.