Why is a calm market so scary?
The last time investors were this blasé about a record-breaking stock market, things were about to get very ugly.
Now market pundits are beginning to freak out a bit about the shortage of people freaking out.
Why? Three words: The Great Moderation. That’s what self-congratulatory policymakers and bankers had started calling the decades leading up to 2007. Inflation was low. GDP had smoothed out. Markets were calm, too. And then -- boom!
Josh Brown last week at the Reformed Broker:
Volatility is nowhere to be found -- not in currencies, in fixed income or in equities. Complacency rules the day as investors and institutions gradually add more risk, using leverage and increasingly exotic vehicles to reach for diminishing returns in an aging bull market. This as economic growth -- led by housing and consumer spending -- stalls out and the Fed removes stimulus that never really worked in the first place.
On Monday, Mohamed El-Erian on Monday raised the possibility of another "Minsky moment," last seen in 2008:
[The late economist Hyman] Minsky went further in demonstrating how stability ends up breeding instability . . . At some point, financial stability becomes too much of a good thing, because it encourages excessive and ultimately irresponsible risk taking by individuals and institutions. In the process, the economic system and, therefore, collective interest are threatened.
The Buttonwood columnist at the The Economist sounded a little less worried:
But this feels nothing like the late 1990s when equity markets seemed obviously bubbly; flows into equity mutual funds have been very restrained and there is no sense of popular enthusiasm for the market (depending on who you believe, in 1929, smart insiders sold stocks because elevator operators or shoeshine operators were dispensing tips).
What we have is a very odd market, in which volatility is extremely low, and economic optimism seems high as judged by the equity market but not by the bond markets, emerging markets or commodity prices.
One thing about the Great Moderation. Even at the time, people noted that despite big-picture, macroeconomic calm, individuals and households experienced considerable volatility in income, and not much growth. This turned out to be the economy's Achilles' heel: Once real-estate prices backed up, it became clear how much many households were depending on debt to stay afloat.
More than five years after the crash, Zillow reports that nearly 19 percent of homes are still underwater, meaning borrowers owe more than the house is worth. Households balance sheets are wobbly. Investors may be calm, but on Main Street the economy continues to feel precarious.
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Well isn't that the proof needed to show that most are just as Naive now as they have been in the Past. All they care about currently, stocks went up, until that stops, don't expect the lack of anxiety to really change. Once the House of Cards implodes, Then you will see just what anxiety really means.
The VIX is down, New Records (ex NASQ) set on a daily, weekly basis...
New Foreign capital coming into U.S. Markets...
QE slowly being taken out of equation...
Trading very thin, more so then usually...?
Older investors, past investors entering back into Markets on a low key basis.
Stocks or shares of Good Companies creeping up...Dividends have been slowly increasing.
Stock buybacks have effected prices and bolstered Company Values.
No Churn in the Markets are the only thing making the Big Boys nervous...THEY CAN'T MAKE $$.
Their hands and money are tied like the Small Investors.
"I'm not scared. . .I've been 'sitting on the sidelines' during this whole bull-run. . ."
Hmmmm, I don't know for sure, but that "sure as hell sounds scared" to me...??
Well,,, without the Fed dangling any new gimmicks to pump up the market it has been left to its own devices. Picture a rocket at the top of its apogee. Things are calm at the top but as it noses over things get exciting again. What the Fed is worried about is that as they pull out, nothing else seems to be pushing the rocket.
The bottom line is we are turning into an economy that doesn't need people to work for a living. If you can't work, how can you buy the stuff the machines (or Chinese) are making. Quite a conundrum.
"The Buttonwood columnist at the Economist sounded a little less worried:
Well if you don't or can't understand that equity markets are far more Bubbly now than then, then YOU should NOT be giving out investment advice. Don't mistake Breakouts in Modern Stock Markets to fundamentals nor Reality. We all know stocks can go much higher then anyone thinks before any Bubble Actually Burst. This has been no Different now then in the Past.
Boy is it only me or does the talk about market volume seemed to drop off the radar here for some reason?
The lull is because the media is not attacking the politics. When Bush was president there wasn't a week that went by without them talking about the deficient or high gas prices or something else. All you here in the media is how well things are and how much better they're getting. This doesn't make sense, all this new regulation driving prices up and tax increases make the economy better????
Higher taxes more regulation makes the economy better??? No
A pound of pastrami is = $13.89
A pound of chicken breast is= $ 9.89
a 1/2 gallon of chocolate milk= $ 5.69
If this isn't the "New Normal"
then INFLATION is about to burst
And Wall Street will be the first bubble to pop..
CGT.....There she goes, blatting about the market, and then prattling about Obama...
TWO(2) THINGS SHE REALLY DOESN'T KNOW ABOUT....!!!
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