XJO (ASX) Thur, 11 Jun -- Are You Not Entertained!

Originally posted by woomp001: ↑

I don't think the bear's are getting too excited just yet..

It's still very early in this whole piece. To really get keenly bearish, I would want to see the XJO back under 5600.

But to your piece prawn man.

I can't help but think that the analysis is a little simplistic.

If CB's could actually just fix everything, what has gone wrong in the EU for the last decade?

Or in Japan for the last 30 years?

CB's and governments can print and stimulate, but there are limits, not too mention the huge risks around unleashing the inflation genie..

Capitalism depends on creative destruction.

Capitalism depends on the business cycle.

Our current attempts to abolish the business cycle, kick the can down the road into perpetuity, and to keep zombie banks and companies alive forever, is a poor plan.

I actually fear that we are witnessing the death of capitalism in the US and replacing it with a socialist, centrally planned economy.

One where the FED decides which companies survive, and which one's fail.
One where entire bond markets are effectively nationalised.

I wouldn't be so quick to believe that everything will be just fine, simply because CB's and governments have mandated it so.

There are still massive risks, and massive unintended consequences.

Finally, as a current bear, I am certainly not saying that the end is nigh, and that the XJO is going to 3000. (Equally however, ATH's are completely irrational also at this stage).

It's more that I lament that markets are no longer really markets.

I lament the poor decisions of our leaders: simply leading to the debasing money, ever worsening Gini coefficients, and poorer outcomes for the majority.

Interest rates need to be higher as an example. Our current zero bound rates are actually bad for the economy. Household savings rates actually go up as I rates go to 0..

I'm fairly sure few will read this, this late in the days thread....

My overarching, and final comment, is that there really is a disconnect between the real word, and current market valuations.

It's still a time for caution... Just like I said this morning, B4 today's little sell off

Expand

Amigo, thanks for the thoughtful post. I don't know how it is going to end, but agree that personal debt and government debt cannot continue to grow at this rate. However central banks have cards up their sleeves which we don't even think about. For example, after WW2 the Japanese economy was ruined. So one of the meaures they took was to just change the currency! They removed the Ren and the Cen and replaced it with the Yen. That trick (plus others) worked a miracle and lasted until about 1985. And don't forget in Oz we re-branded the Aussie pound to Aussie dollars in 1960s, and the dollar was floated in the 1980s. Also, the 1, 2, 5 cent coins were removed in the 1990s. Those measures didn't revalue the currency, but who knows what desparate measures will be taken in a few years when the wheels fall off completely. My view is that most sane people agree the system is in fatal decline, but I would not bet my house that the crisis caused by Covid19 will be the trigger that will cause too much further decline in stocks. In fact I think it will take less than 12 months for most sharemarkets to be higher than they were pre-covid. For simplicity, suppose I gave you a printing press which was the size of that of the Reserve Bank, and suppose I allowed you to act to disrupt traditional chart analysis of the stockmarket, then throw into that a government with a good publicity machine and a few short term goals (such as being re-elected), and on top of that I give you four major banks who are happy to follow whatever line you give them. What would you do and how long would you expect it to last?