Why the big players know the stock market bubble is about to burst
A quiet evacuation of the stock markets is taking place at the very top, opinion-leading end of stock markets around the world. They bought gold in its bull phase, and top-end property all last year. Now the élites are selling their investments in a global economy that’s heading for the buffers.
It is I think highly likely that, a year from now, George Osborne’s Help to Buy bribe is going to boomerang and hit him between the eyes. For just as the Election is about to kick off, a lot of young mugs are going to find themselves the proud owners of negative equity….in the context of rising interest rates and plummeting house prices. This is because, at the end of the day, one can manipulate everything except real consumer goods sales. Sales get audited within minutes, results have to be announced, exports can be measured, world trade totals aggregated, and trends drawn up. Not even a monster built from the important bits of Diamond, Dimon, Bernanke, Carney, Geithner, Draghi and Schäuble can disguise it.
Mario Draghi has done more than most in trying to reinvent reality. His breathtaking ability to hide data and sail through press conferences passes all known understanding, but SuperMario will have a job to hide all those rapidly rusting Fiats sitting at the various Italian dockyards. The straightforward real world is one in which America is chucking money it doesn’t have at an economy that won’t revive, Brussels is flogging a dead horse with austerity, China is slowing down with its brakes screaming for mercy, and the Aussie dollar is reacting in turn to that by falling rapidly.
As for the UK, we had the spectacle yesterday of some heavy-hitting journalists making complete tits of themselves. Chief among these was Ben Brogan at the Telegraph, who mocked Ed Balls’s ‘flatlining’ description of the UK economy purely because one period showed 0.6% economic growth..a figure so small, on a graph not projected onto the Tate it would look like, um, flatlining. Ben was particularly daft in going the whole hog before even the seasonal adjustments have been applied by the ONS. Balls himself is an unpleasant, hypocritical prick, but Brogan might end up making him look positively prescient.
As usual, the UK’s economy showed increasing dependence on services and a total lack of success in manufactured exports. Even someone who got grade -37 in GCSE Economic Geography could tell you that our services sector is staring down the barrel of world financial meltdown, and you can’t export houses being built and sold thanks to the Draper’s puerile HTB scheme.
So to fit what’s happening in the UK into the global picture summarised two paragraphs ago, I’d say we are throwing money we haven’t had since God was a girl at banks that are hopelessly riddled with undeclared debt, with an economy that was rendered unipedal by the anti-Union nihilism of Margaret Thatcher thirty years ago. Britain isn’t just economically and fiscally f**ked, it’s been rogered with a yard brush up the tradesmen’s entrance for good measure. “This shows the economy is mended” George Osborne tweeted yesterday. What a clown.
We’re not yet into the final furlong, but evidence that the big global winners from the last 15 years are now busy on the last stage of making themselves as bombproof as possible is evident far and wide. Warren Buffett, the great cheerleader for US stocks, is dumping shares at an alarming rate. Buffet gave warning when he recently complained of “disappointing performance”at Johnson & Johnson, Procter & Gamble, and Kraft Foods. Now the latest audit of Buffett’s Berkshire Hathaway shows how old Methuselah sold 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Warren also sold his entire stake in California-based computer parts supplier Intel.
“…a large drop of some sort [in the stock markets] is a virtual certainty. It started with the reckless strategy of the Federal Reserve to print a massive amount of money out of thin air in an attempt to stimulate the economy. These funds haven’t made it into the markets and the economy yet. But it is a mathematical certainty that once the dam breaks, and this money passes through the reserves and hits the markets, inflation will surge.