WHAT IS INVISIBLE ABOUT MARKET PRICES?
Scuffy posts (28 June) on MINYANVILLE HERE
“Technically Speaking: As Expected, Central Bank Rescue
What Do They Know?”
“While I am not surprised by global Central Banker's rush to action, it is important to keep things in perspective. Take a look at the chart below (THE CHART IS HYPER-COMPLICATED!)
The highlighted blue circles are what I want you to focus on.
Since the end of QE3 in October of 2014, the markets have made little real progress despite a marked pickup in price volatility. Almost like clockwork, as the markets approach short-term "oversold" conditions the market reverses course and rises back to "overbought" levels before the next decline. Tick. Tock.
Against a backdrop of weakening fundamentals and economic data, the markets have drifted from one Central Bank action to the next. As shown above, the drop last summer of -12.2% spurred Fed members to assure markets there was no rush to hike interest rates. The "relief rally" that ensued drove markets higher by 13.1% only to be tripped up by the rate hike Bullard said the Fed was in no rush to do.
The tightening of monetary accommodation, and threats of four more in 2016, led to a rebalancing of risk at the beginning of 2016 and a decline of -14.4%. That decline spurred the Fed in February to coordinate with the ECB and BOE to coordinate monetary support, combined with the coming ECB's monetary "bazooka" in March that drove markets higher by 17.1%.
Despite the increased size of advances and declines, each rally and decline remain confined within the continuing range of October 2014 lows and the May 2015 highs.
Here is the point. It took previous declines in excess of 10% before global Central Banks took action to support prices. Following the "Brexit," it only took a -6.2% decline before Central Banks went to work.
The "invisible hand" of Central Bank interventions has been clearly evident since the end of QE3. With global interest running at, or below, the zero bound, there are few policy tools available to support already anemic economic growth.
The question that should be asked is "what do they know that we don't?"
COMMENT
A most complicated account of what central bankers and financial specialists did when the Brexit vote became news.
The ‘give-away’ story line, wel gives it sway:
‘The "invisible hand" of Central Bank interventions has been clearly evident since the end of QE3.’
Er, so what happened to the useless punch line about the machinations of the obligaotry ‘invisible hand’?
The nonsense of ‘invisible hands’ talk is exposed. They know what financial experts did and what they affected. Markets work by visible prices and cannot work without them.
[See also: David Stockman’s ‘Contra Corner’ HERE ]
0 Comments:
Post a Comment
<< Home