I’ve had the pleasure of being in this business for many years and I go very strongly on what my guts tell me.
Right now my spider sense is tingling and that can spell trouble.
Try as I might to analyse these moves each way I look at it I can’t add it all up.
It feels like the market is running from one extreme to the other.
It’s seems like it’s trying to balance a ball on a see-saw. As the ball rolls and the see-saw tilts the market is scampering to the other end to keep it balanced, then the ball rolls the other way and the market follows.
I’ve long said that I feel that there is a big difference in the prices to fundamentals and that at some point they will catch up one way or another.
It would be easy to point to theses moves and say that it may now be happening but even that doesn’t feel right.
So I’ve gone back over history to get a view of the overall picture and it looks quite shocking.
As we know stocks and commodities rose from the lows over the GFC and QE, but it’s hard to call a bubble when the moves last years.
Just take a look at these five year charts.
If you looked at these charts without the hindsight of everything that has gone on over the last few years you’d probably remark that they show a long term trend of growth and prosperity.
Now add this chart into the mix and tell me what picture you see?
That’s not a picture I associate with growth and prosperity.
Now granted I’m taking one small aspect of the downside in using the Baltic chart, but it still adds up to a picture that is not even close to reality. The clock is still ticking on when the prices and reality collide.
So whatever is happening now in the markets it still simply all boils down to money sloshing around in the barrel. Even tapering may not be the pin that pops the bubble.
Those charts show nigh on 5 years of moves and it’s going to take one massive pin to pop.
My gut tells me that it will happen but when that is, is the ultimate question.
Now I’ve managed to confuse myself somewhat. In trying to decipher the short term picture I’ve managed to put it in a long term context.
So the long and short of it. I don’t see these moves lasting as far as the US economy goes. Nothing has changed from the Fed and the economy isn’t improving enough to warrant the optimism. The US isn’t in the hole Europe is but it’s it’s not out of the woods just yet. We’ve got increasing Chinese problems and Japan trying to claw itself out the mire.
All that tells me that is that the chances are things will get worse before it gets better.
Don’t be buying that retirement home in Florida just yet Uncle Ben.
