Attack of the C-Words: Crash,Collapse & Conspiracy

[Shinobi]

Watch out now even the Wall Street Journal is reporting the markets may be coming down.

In an op-ed piece called "Is a Crash Coming?" by Brett Arends, the fear is palpable.

The problem is that Brett is using the wrong C-word. He should have asked "Is an Economic Collapse Coming?" but he doesn't have the balls to say that. Now people are finally starting to use the word "crash," but nobody has the nerve to use the ultimate C-word, which is "collapse." So what's the difference between a "crash" and a "collapse"?

A crash implies that equity markets are dramatically overbought relative to underlying economic fundamentals and there is a level of complacency among investors that current economic conditions do not support, as Fed Governor Thomas Hoenig has suggested as recently as today. This is what causes the crashes of equity markets.

On the other hand, an economic collapse, such as occurred in the 1930s, is different and more frightening.

A market crash does not necessarily lead to an economic collapse of a nation state. What leads to a collapse is a protracted period of deflation. At the end of a deflationary period, equity markets will ultimately experience a crash.

The Great Depression was a stock market crash in September 1929 which precipitated an ultimate economic collapse by 1933. This caused deflationary pressures to begin to build on the planet. It should be remembered that it wasn't only US markets that crashed; it was all markets that crashed as well.

This time we're doing it a little bit differently and that's why so many bears have gotten hurt in the stock market. Nobody expected such a dynamic rally of equity prices after the collapse of the speculative asset bubble of 2004-2007.

This dynamic rally could be called a "fantasy rally" of equity prices which has happened globally in the wake of the asset bubble bursting.

It is true, as the Council of Bald-Headed Shills on CNBC point out every day, that markets actually rallied in 1930 through 1931 off of the 1929 bottoms. But that rally, on a percentage basis, was nowhere near the current rally. We have had dramatic rallies wherein equity prices have rallied on average globally 75% off of the lows.

So what's different this time? Such a rally of equity prices can only be sustained if the planet's economy recovers quickly from the effects of a bursting bubble and that has not occurred. Indeed statistics continue to worsen.

This is actually proof of the Bullish Shill Machine or the great conspiracy and how well organized that has become. It has caused the Joe Six Packers to continue to buy stocks and bid them up into a 75% rally after the collapse of a speculative asset bubble. It is a testament to the success of Bullish Shillism.

Now we find that despite what the Bullish Shills say about price/earnings ratios being "cheap" or in line with historical averages, they are not. In fact they are rich relative to historical averages.

The shills don't quote the historical averages they used to quote. For years the historical averages of price/earnings ratios was always quoted as the 50-year moving average.

Now the Shills quote the 30-year moving average which is a higher number and makes today's numbers look better and more sustainable.

In fact, however, the equity markets are dangerously overbought relative to economic fundamentals.

Indeed there is no time, certainly in the history of the United States, when equity prices have been so overvalued relative to underlying economic fundamentals, and we have reached new heights of overvaluation.

For the rest of this Exclusive Column by Independent Political/Market Analyst Al Martin, subscribe and log on to Al Martin Raw

* AL MARTIN is an independent geo-political/ economic analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. He is considered to be a source of independent analysis for financially sophisticated and market savvy investors, as well as subscribers who want to understand the behind the scenes working of markets worldwide.

Al Martin's website "Insider Intelligence" Insider Intelligence provides a long term macro-view of world markets as well as weekly commodity trading recommendations.
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iC1 Says: What the whole article ultimately fails to say is that its all one big manufactured f*cking illusion.
you can be the brainiest mofo or the smartest in your class, but you will never see past the illusion!
unless you want to wake up.