Navigating Around the ‘Invisible Hand’
Navigating Around the ‘Invisible Hand’ by Michael Ballanger – The AU Report
The Trump-Mnuchin-Powell “directive,” which engaged the Working Group on Financial Markets during the last weekend before Christmas 2018, has worked both beautifully and criminally as the term “moral hazard” has crept back into the mainstream dialogue. Once again, as we have seen countless times since “free markets” were transformed into “managed markets,” charts and graphs and volume studies carry zero sway over the “invisible hand” of the politico-banker cartel.
As the S&P 500 hovers some 300 points above the lows seen on Christmas Eve, we have witnessed the full power and fury of the central banking cabal, complete with their government and regulatory confederates, as they offer shadowless doubt that stock prices are indeed a big part of policy mandate. Also, right up there at the top of their to-do list, is “managing” the prices of gold and its junior surrogate, silver, as their centuries-old utilities as canaries-in-fiat-sensitive coal mines has been denigrated by decades of interventionalist price-capping. It is both maddening and infuriating but it is not unexpected; it was actually announced the weekend before Christmas with the Mnuchin statement regarding the Plunge Protection Team (PPT).
As much as the financial media would love to crow about the “biggest rally in a decade,” nothing—and I mean nothing—would have prevented an all-out crash in stock prices, the severity of which could have easily rivaled October ’87 or ’29, other than the stark and unabashed bailout by the cretins.
The abject panic that was permeating the trading rooms of every major bank and brokerage around the globe, so very palpable in December, has toned down since the government-mandated and bank-executed rescue took hold in very late December, composed of a series of interventions and TV appearances by current and former Fed officials and stock market perma-bulls. However, as I debate the notion of a V-shaped bottom for stocks leading to new highs in 2019, I am mindful of the results of the results of the Santa Claus rally and the First Five Trading Days rule, which would suggest that 2019 has a 70-80% chance of being an “up” year.
While the stats are simply a look in the rear view mirror of historical stock prices, they certainly are no guarantee of a 2019 lift. But keep in mind that even if inflation came roaring back this year as stagflation takes hold of the mainstream economy, a 5% rise in consumer prices versus a 2% rise in the S&P would satisfy the statistical forecast but be of little or no benefit on a “net” basis.
This chart shows the relative performance of the major asset classes (gold, U.S. and European stocks, bonds, currencies, and crypto) since December 12. While a longer-term chart would reveal and much different result, the message is clear: Gold is outperforming everything in the past 45 days.
This is again why I always look around the world to gauge performance. It is also why gold prices are rising and at new all-time highs against a number of non-U.S. currencies. Despite the desperation of the price-capping exercise in gold, both it and silver have been able to hold the bulk of their gains since the summer lows and appear to be simply biding time until the next major downdraft in global equities sends the “fear bid” back into precious metals.