2019: The Beginning of The End
The comments below are an edited and abridged synopsis of an article Adam Taggart
For ten years, the world’s central banks have dragged everyone along for one last attempt at scaling Mount Credit.
At several points along the way (2011, 2013 and 2016), it seemed certain that we were on the wrong path and all was lost. People were warned of the risks, but they found a way to navigate even higher from there.
Until and unless the central banks reverse course, 2019 will see more of the same. More stock market volatility, more bond losses, more falling real estate. Eventually these credit stresses will affect those portions of the economy dependent on continued access to dumb money.
Weak companies that cannot sustain themselves without borrowing more will go out of business and lay people off. Major corporations, seeing the writing on the wall, will reel in their own hiring and expansion plans.
Eventually all the of the highly leveraged trading strategies will have to pack up shop and go home, and that’s when we discover that these markets are fake. No actual liquidity, only the appearance of such as temporarily afforded by all the computer algos out there.
The concerns about markets so dominated by trading programs are that they are too easily subject to manipulation and sudden sharp movements that could result in markets being shut down due to lack of participation, because the algos found conditions out of parameter and they left in the blink of an eye.
Unless the central banks reverse course and make the next round of QE larger than any previously, we’ll see lots of declines in financial asset prices. Only this time it won’t be constrained to falling stocks; it will envelop everything.
Up for discussion: a Fed too far; it’s over; first they came for…; we might be wrong, but we’re not confused; and finally, a short conclusion.