Stage Set For A BIG Bear #Market

"Without a game-changing trade deal, all we’re left with is a slumping global economy, growing civil unrest across the world, a looming corporate debt crisis — all while are assets still hovering at all-time high valuation multiples."

by Adam Taggart

At The End Of The Day, It’s All About Confidence

And sentiment in the markets is now souring. Bigly.

While many factors contribute to their creation, market reversals only happen when a shift in sentiment occurs.

That’s why bull markets can go on for much longer than reason merits. As long as the marginal buyer is keeping the faith that he can sell to someone else for more, prices will remain elevated no matter how ugly the underlying fundamentals:

But at some point, the once-bulletproof euphoria becomes exhausted. And at the critical margin, net buyers become net sellers. (For a reminder of the supreme importance the margin plays, revisit our report The Marginal Buyer Holds The Pin That Pops Every Asset Bubble)

Here at PeakProsperity.com, we’ve been waving a giant warning flag of late that the scorching rally since January is a massive head-fake; unwarranted and completely unsustainable.

In our recent piece, The Bull(y) Rally, we exposed how an extreme and unnatural amount of hand-waving, jawboning and razzle-dazzle from the central State has been expended to ‘justify’ the ludicrous levels today’s prices are at given the preponderance of data showing the world economy is sliding into recession.

We’ve been shining a bright light on the technical compression seen in the major stock indices, indicative that a major breakout move is coming — one we’ve argued is much more likely to happen to the downside.

Well, with the recent fizzling of the principal storyline supporting the bullish narrative — an imminent trade deal with China  — our predicted downside breakdown finally occurred this week:

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TEN YEAR BULL MARKET OVER?

#Economic Collapse Looms - Just Do The #Math

"The main lesson for me is that growth is not a “good quantum number,” as physicists will say: it’s not an invariant of our world. Cling to it at your own peril" 

By Tom Murphy

 

Exponential Economist Meets Finite Physicist

Some while back, I found myself sitting next to an accomplished economics professor at a dinner event. Shortly after pleasantries, I said to him, “economic growth cannot continue indefinitely,” just to see where things would go. It was a lively and informative conversation. I was somewhat alarmed by the disconnect between economic theory and physical constraints—not for the first time, but here it was up-close and personal. Though my memory is not keen enough to recount our conversation verbatim, I thought I would at least try to capture the key points and convey the essence of the tennis match—with some entertainment value thrown in.

Cast of characters: Physicist, played by me; Economist, played by an established economics professor from a prestigious institution. Scene: banquet dinner, played in four acts (courses).

Note: because I have a better retention of my own thoughts than those of my conversational companion, this recreation is lopsided to represent my own points/words. So while it may look like a physicist-dominated conversation, this is more an artifact of my own recall capabilities. I also should say that the other people at our table were not paying attention to our conversation, so I don’t know what makes me think this will be interesting to readers if it wasn’t even interesting enough to others at the table! But here goes…

Act One: Bread and Butter

Physicist: Hi, I’m Tom. I’m a physicist.

Economist: Hi Tom, I’m [ahem..cough]. I’m an economist.

Physicist: Hey, that’s great. I’ve been thinking a bit about growth and want to run an idea by you. I claim that economic growth cannot continue indefinitely.

Economist: [chokes on bread crumb] Did I hear you right? Did you say that growth can not continue forever?

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MIT LIMITS TO GROWTH