The myth about ‘market fundamentals’

By   /   February 7, 2018  /   11 Comments

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What we have isn’t a fully functioning market secure with all the fundamentals, we have a waiting time bomb. 

One of the interesting narratives that came out from many economists was that the Dow Jones fall wasn’t a problem because the ‘market fundamentals’ are all good.

The argument goes that there is global economic growth and these sudden shockwaves are just an anomaly.

There are some serious problems with this.

The first is that it pre-supposes that the over $12Trillion in quantitive easing printed money, and over $10Trillion in global bonds with the lowest interest rates in 5000 years  could be regarded in any way shape or form a ‘market fundamental’.

The second is that at some point, the shear weight of market technicals in a nanosecond trading AI algorithm rigged Casino is going to crash the ‘market fundamentals’.

What we have isn’t a fully functioning market secure with all the fundamentals, we have a waiting time bomb.

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11 Comments

  1. Siobhan says:

    I wouldn’t mind the bomb going off so much if I thought it meant a fresh start. Infact it would be a case of the sooner the better.
    But just say ‘The Economy’ crashed tomorrow.
    World wide.
    Do we have anyone waiting in the wings to present us with a new way forward?
    Or will it just be an awesome opportunity for the likes of Bezos, Gates, Buffet, Ortega etc etc to reshuffle the card deck even further in their favour?

    Market and Economy crashes are how these guys get their jollies. They love the ‘rush’, and as long as they are in charge the rest of us mere mortals are like the browbeaten partner, all we can hope for is that our adored one has had a good night at the casino.

    The Guardian may have knee capped Corbyn from the get go, which seems to have contributed to many Leftish voters in NZ not taking his example seriously, but I can’t imagine any other leader of a major political Party (the largest political party in Western Europe) using this sort of rhetoric
    https://uk.reuters.com/article/uk-britain-politics-banking/corbyn-tells-morgan-stanley-were-a-threat-idUKKBN1DV3Y3

  2. jono says:

    Agreed Martyn. The fundamentals are not there. Because the equity on these companies balance sheets has been pumped up using cheap debt. This being the case the share market is over valued. When this thing crashes it will take a lot of businesses and banks with it.

  3. jono says:

    Agreed Martyn. The fundamentals are not there. Because the equity on these companies balance sheets has been pumped up using cheap debt. This being the case the share market is over valued. When this thing crashes it will take a lot of businesses and banks with it.

  4. […] is as problematic as claiming the ‘market fundamentals‘ are somehow a touchstone against any wider […]

  5. Afewknowthetruth says:

    The UST 10yr yield is up strongly to 2.84% (+6 bps).

    Meanwhile oil is well down, with Brent at $65.28 (near $70 recently).

    The fundamentals are NOT good.

  6. esoteric pineapples says:

    I don’t understand why there hasn’t been runaway inflation with so much money being printed

  7. Here’s a question for the ACT/neo-liberal purists: how can a “free market” exist when buying and selling is predicated on pre-set algorithms?

    We might as well put the planet’s entire financial system on “auto” and eliminate the human factor entirely.

    Computerisation would eventually lead to either a permanent crash or an equilibrium where “buying” would be delicately balanced with “selling”. Profits: nil.