Business

Don't fight The Fed or The Machines...

The Dow is now the 2nd most overbought in 22 years... 3rd most overbought in 62 years

The core thesis presented earlier by Fasanara Capital, is that what is taking place in the market right now is the blowing of arguably the biggest asset bubble in history, or rather twin bubbles - impacting both equities and bonds...

... created by trillions in central bank liquidity injections, and characterized by unprecedented equity valuations...

... concurrent bond bubbles, especially in Europe...

... defined by a "fake markets cycle"...

... which relies on narratives created daily to justify the "fake markets"...

Authored by 720Global's Michael Lebowitz via RealInvestmentAdvice.com,

As Halloween nears, kids are choosing costumes to transform themselves into witches, baseball players and anything else they can imagine. In the spirit of Halloween, we thought it might be an appropriate time to describe the most popular costume on Wall Street, one which many companies have been donning and fooling investors with terrific success.

With the market now stuck in the "Icarus Rally" melt-up predicted earlier in the year by BofA Michael Hartnett, in which EFTs, algos and desperate carbon-based hedge fund managers are all chasing performance, i.e. beta, in the last weeks of the year, at least until the inevitable "Humpty Dumpty great fall", some have been naive enough to ask just how overvalued are stocks as of this moment.

Inflation is going to annihilate the stock market.

The reason, in fact the BIG reason, that stocks have been soaring since November 2016 is because of the coming inflationary storm. Stocks LOVE inflation at first as it results in asset prices rising.

However, stocks absolutely HATE inflation once it starts eating into profit margins. When this happens, companies begin to lose money as higher operating costs eat into their profits.

On that note, take a look at the following chart of corporate profits pre-tax.