Stocks Have Reached A Permanently High Plateau

Stocks Have Reached a Permanently High Plateau  

A permanently high plateau of stock prices is a marvelous innovation.

Somebody said this before, of course, but one glance at a chart of the S&P 500 tells us that stock prices have
reached what looks like a permanently high plateau. How can we identify a
permanently high plateau? One sign is price never touches the 50-week
moving average (MA), much less the 200-week MA: prices just keep
marching higher in a volatility-free permanently rising plateau.

It's almost like a film set, where the special effects department (i.e. the Financial Singularity) has been called in to get rid of pesky volatility and fluctuations.

Memo to Head Office: Done. The MACD indicator has been locked into a permanently high plateau as price marches higher in an orderly fashion.

A permanently high plateau of stock prices is a marvelous innovation: you can practically set your watch to the steady tick of new all-time highs, and all you need to plan your retirement or cash-out of your stock options is a ruler and a pencil--just extend the price line as far forward as you want, and calculate your wealth.

The only downside of this permanently high plateau of stock prices is that it eliminates the need for the financial punditry and the workforce of money managers. With bearish influences and volatility both eradicated, there is nothing left to talk about except the upward slope of the permanent plateau.

As for money management--for most people, there's no need to play around trying to beat the index by a tiny percentage: just lock your money up in a index fund and watch it grow, month after boring month, year after boring year.

The Federal Reserve's testimony to Congress will be boringly predictable: "stock prices continue to rise in an upward sloping permanently high plateau." Congress and the Fed will congratulate their outstanding management of the economy, and once behind closed doors, congratulate the Special Effects crew for their fine work maintaining the permanently high plateau.

Our permanently high plateau of stock prices greatly simplifies life. If you own enough of the stock market, you can calculate your wealth next year and order a new private jet right now, because you know you'll be $25 million richer by then.

And of course the economy will thrive on this steadily rising permanently high plateau because those new private jets will need to be manufactured and maintained, and small airports in wealthy enclaves will need to add space for the new private jets.

Let's face it: this permanently high plateau of stock prices is financial nirvana. Permanently high plateau has such a nice ring to it, doesn't it? Let's say it three times just for the pleasure of the alliteration: permanently high plateau, permanently high plateau, permanently high plateau.

Sourced from Charles Hugh Smith from Of Two Minds

INFOGRAPHIC: A forecast of when we'll run out of each metal (Commodities)

Here is one interpretation of when we’ll run out of each metal or energy source. While the technicalities of some of this information can be debated, I think the general theme runs the same. There is a limited supply of these commodities – and if there are no discoveries, no price changes, and no changes in consumption, we are running out relatively soon. In my opinion, there are two caveats that are always worth considering when looking at something like this.

1. “Reserves” are an engineering number that are based on economic viability. Technically speaking, there are small concentrations of gold everywhere. It is just not usually viable to mine 0.1 g/t gold. When we will “run out” of each mineral in this chart is based on current reserves and prices. If the gold price doubles, then suddenly it is economic to mine more.

2. This chart is a reminder that something has to give. Either prices are going to have to go up, or new amazing discoveries have to be made to keep prices down. It’s basic economics, and either way it seems that there are many opportunities in the mining industry for investors and speculators on both fronts.

JEFF DESJARDINS

Here's Why The Market Could Crash - Not in Two Years, But Now

Markets crash not from "bad news" but from the exhaustion of temporary stability.

Yesterday I made the case for a Financial Singularity that will never allow stocks to crash. We can summarize this view as: the market and the economy are not systems, they are carefully controlled monocultures. There are no inputs that can't be controlled, and as a result the stock market is completely controllable.
 

Today I make the case for a crushing stock market crash that isn't just possible or likely--it's absolutely inevitable. The conceptual foundation of this view is: regardless of how much money central banks print and distribute and how much they intervene in the markets, these remain complex systems that necessarily exhibit the semi-random instability that characterizes all complex systems.
 

This is a key distinction, because it relates not to the power of central banks but to the intrinsic nature of systems.

One of the primary motivators of my work is the idea that systems analysis can tell us a great deal about the dysfunctions and future pathways of the market and economy. Systems analysis enables us to discern certain pathways of instability that repeat over and over in all complex systems--for example, the S-Curve of rapid growth, maturation and diminishing returns/decline.
 

One ontological feature of complex systems is that they are not entirely predictable. An agricultural monoculture is a good example: we can control all the visible inputs--fertilizer, seeds, water, pesticides, etc.--and conclude that we can completely control the output, but evolution throws a monkey wrench into our carefully controlled system at semi-random times: an insect pest develops immunity to pesticides or the GMO seeds, a drought disrupts the irrigation system, etc.
 

The irony of assuming that controlling all the visible inputs gives us ultimate control over all outputs is the more we centralize control of each input, the more vulnerability we introduce to the system.

Those arguing that central banks (and their proxies) can control the stock market have the past six years as evidence. Those of us who see this heavy-handed control as increasing the risk of unpredictable instability have no systems-analysis model that can pinpoint the dissolution of central bank controlled stability. As a result, we seem to be waiting for something that may never happen.
 

Despite its inability to predict a date for the collapse of stability, I still see systems analysis as providing the most accurate and comprehensive model of how complex systems function in the real world. If the economy and the market are indeed systems, then we can predict that any level of control will fail no matter how extreme, and it will fail in an unpredictable fashion that is unrelated to the power of the control mechanism.
 

Indeed, we can posit that the apparent perfection of central-bank engineered stability (i.e. a low VIX and an ever-rising market) sets up a crash that surprises everyone who is confident that central-bank monocultures never crash. In the real world, manipulated stability is so vulnerable to cascading collapses that crashes are probabilistically inevitable.
 

That raises the question; why not crash now? After all, all the good news is known and priced in, and all the bad news has been fully discounted. Why shouldn't global stock markets crash big and crash hard, not in two years but right now?
 

Markets crash not from "bad news" but from the exhaustion of temporary stability. The longer that temporary stability is maintained by manipulation, the greater the severity of the resulting crash.
 

As I noted in The Coming Crash Is Simply the Normalization of a Mispriced Market, this line from songwriter Jackson Browne captures the ontological falsity of permanent market stability: Don't think it won't happen just because it hasn't happened yet.

Sourced from Charles Hugh-Smith of Of TwoMinds blog,

"Printed" Money For Nothing

World GDP growth expectations just hit their lowest in two years... and stocks didn't

Nickel hits 7-week high as Philippine news spurs speculators

Nickel prices climbed to their highest in seven weeks on Thursday as speculators returned to the market on worries that the Philippines could follow Indonesia in banning unprocessed ore exports.

Three-month nickel on the London Metal Exchange soared to a session high of $19,498 a tonne, its strongest since July 14, driven by buying from commodity trading advisers (CTAs) and macro funds, traders said.

The metal later pared gains to end at $19,395 a tonne, up 1.7 percent. It is up nearly 40 percent so far this year.

Nickel hit a 27-month peak of $21,625 a tonne in May after top exporter Indonesia banned unprocessed ore shipments to stimulate its domestic processing industry.

Prices jumped 2.8 percent on Wednesday on the news that a Philippine senator had proposed a ban on raw materials exports. 

"We've taken away Indonesian nickel ore and if you also take away Philippines as well, you can wave goodbye to the nickel pig iron (NPI) industry in China," said Nic Brown, head of commodities research at Natixis in London. "So this is clearly a big deal. That's why the market is taking it so seriously."

After nickel's May peak, prices drifted lower and many speculators closed long positions, but the market is likely to extend gains as they re-enter the market, Brown said.

"We expected to see prices above $20,000 a tonne at some point in Q4 going into Q1 next year. But we could get there rather sooner than we expected and even $25,000 is not unreasonable if you take Philippine ore out of the equation."

COPPER GAINS

Copper rebounded from two-week lows and other metals also rose after the European Central Bank cut interest rates to new record lows to support the stagnating euro zone economy. 

More accommodative monetary policy could free up liquidity for industry and investors, supporting metals prices.

ECB President Mario Draghi said if inflation looked like staying too low for too long, the ECB Governing Council was unanimous in its commitment to using other "unconventional instruments" - a phrase taken as code for printing money as the U.S. Federal Reserve and Bank of England have. 

LME copper closed 0.4 percent higher at $6,930 a tonne after falling 1 percent in the previous session when it reached a two-week low of $6,882 a tonne.

Dimming copper's price prospects, however, were mine supply bottlenecks being cleared and beginning to feed into the market.

Newmont Mining Corp signed a deal with Indonesia that will allow for the resumption of copper concentrate exports next week, the head of the firm's local unit said, ending an eight-month tax dispute.

Aluminium closed 1.3 percent higher at $2,105 per tonne, zinc ended 1.4 percent higher at $2,398 per tonne, lead closed 0.8 percent higher at $2,225 per tonne and tin closed 0.7 percent higher at $21,500 per tonne.

Zambia abandons the emotive rule on copper exports

From September 8th, the rule which instructs the companies to submit documents from destination countries in order to receive tax refunds, will be no longer required. This will end the cat fight over the 600 million dollars, gathered tax refunds, which have been a threat to Zambia’s mining industry.

The announcement was made just a few days after the chamber of mines notified that most of the copper mining companies in the country are facing a harsh financial crisis due to the blockage of tax refunds from the government, which is creating deficiencies in output and also alarming job cut offs in the country.

Ivan Glasenberg, the chief executive of Glencore stated that, the deduction would help to strengthen the company’s expectations to expand the company’s unit in Zambia. Glencore is planning an expansion worth 323 million dollars at the company’s Nkana copper mine, which would extend the lifetime up to a time period of 30 years.

Copper demand in China hangs on the power sector

Last year, more than half of copper demand of China came out from its power sector, but this year there has been a decline. The constant diminishing of the demand in power sector might cut down the rate of China’s import, which is a determining factor in international market prices.

According to the industry sources, this year, the investment in power sector had been expected to gain a 10 percent hike, but instead the sector had to cope with .6 percent drop in the investment compared to last year’s demand; shows the reports of China Electricity Council.

A senior analyst of Antaike Information Development Co; a state supported research firm, Yang Changhua stated that if there would be no rise in the investment of power sector, the consumption forecast of the 2014 should be adjusted down. The research firm had already forecasted the country’s copper consumption, which said that the consumption would have 6.7 percent hike, which will be an increase of 8.7 million tones.

The dominant in the investments in power networks in the country, the State Grid Corp of China stated that, it was being audited in May, and catching this phrase, industry source states that, the reason behind the sudden decline of demand in the power sector might be due to the audit, of which the reason is still unknown.