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Bad News is Good News! (January 22, 2016)

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Can anyone seriously believe this garbage? Central banks across the globe are becoming increasingly dovish as it pertains to the world economy, so the markets react to the “bad news” of the high probability of even more stimulus by rallying the stock market up, higher and higher!

According to Mario Draghi:

“We’ve plenty of instruments,” Draghi said at the World Economic Forum in Switzerland. “We have the determination, and the willingness and the capacity of the Governing Council, to act and deploy these instruments.”

Plenty of instruments (translated):

  • Quantitative Easing
  • Negative Interest Rates
  • Cashless society
  • Bank bail-ins
  • Etc.

Further, you’ve got idiot Chinese government officials trying to calm the nerves of investors by reassuring the public that the government will play the role of Big Brother when things get bad:

“An excessively fluctuating market is a market of speculation where only the few will gain the most benefit when most people suffer,” Li told Bloomberg News after arriving at the World Economic Forum’s annual meeting in Davos, Switzerland. “The Chinese government is going to look after the interests of most of the people, most of the investors.

Li, 65, is the most senior Chinese official yet to underline the government’s readiness to intervene should the market turmoil of last summer and the start of 2016 continue. So far this year, the Shanghai Composite and the Hang Seng China indexes have both lost more than 15 percent, even as the central bank injects cash into the system to drive down borrowing costs and boost the economy.

 

Only the few will gain the most benefit when most people suffer…

No, really?

What else would you expect to happen when you keep attempting to fight the natural forces of a FREE MARKET by intervening anytime trouble starts brewing…

The markets want to sell-off!

The markets are desperate to go DOWN!

More stimulus/intervention = More “Wealth Effect”= More malinvestments = More kicking the can down the road!

 

Long-term ramifications will be even more drastic when this sh!tstorm is finally allowed to hit… You can’t keep the lid on the real bad news forever…

 

Buy the dips?

 

More like “Sell the rallies…

 

People are starting to wake up and catch on… This con game is an absolute joke!

But if the shorts want to load up on these type of mini-rallies for some more probable BIG GAINS in the upcoming weeks/months ahead…

PLEASE NOTE:

My focus is on the long game. Market timing skill is a requisite to go short (e.g. buying puts). This is obviously risky stuff (although it can be extremely lucrative riding a downtrend). Do so at your own risk!

THIS IS NOT A RECOMMENDATION!!!

Just an example (one of many):

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CVX @ $83.57/share with oil just a smidgen over $30/barrel (dropping lower seemingly every week) and the markets beyond oversaturated with black gold!?!

 

I think we really do live in Bizzaro World…

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{ 5 comments… add one }
  • mikeNo Gravatar January 22, 2016, 11:01 am

    wait a minute. “so the markets react to the “bad news” of the high probability of even more stimulus by rallying the stock market up, higher and higher!”

    The market just fell 2,000 points in a very quick and precipitous manor. The markets were VERY deeply oversold. Its normal to have whats known as a pullback. That does not mean a trend change. The markets rallying 1% is not what I would consider to be ground breaking. The sellers are taking a breather, some bulls are showing up but the bears will resume.

    The news is really irrelevant because a lot of this stuff is already baked in. Buyers are coming in at these levels and buying up the oversold conditions and when those prices rise people who are shorting the market have to cover which causes more buying. So in other words this little blip is normal after a major sell off. When we see the market rallying 500-1000 points higher then I would agree with you that there is conviction behind it and the “fundamental” story has changed.

    Buy the rumor sell the news.

    good luck

    • FI FighterNo Gravatar January 22, 2016, 11:14 am

      Mike,

      You’re absolutely right — the markets were deeply oversold and this rally can/should be expected… There are also a record number of shorts out there right now (surpassing last August), so that’s worth noting.

      It’s the mainstream news that is coming out that is most frustrating… Telling investors to “stay calm” and “relax” is just a way to con in more suckers who are too late to the party…

      My concern is when more stimulus announcements get rallies moving for several trading sessions, enticing the retail folks back in b/c I personally know investors who don’t pay attention to the “real news” and in fact go in blind buying the dips…

      That strategy has worked brilliantly up to 2015, so you know the saying, if it ain’t broke…

      At some point, a new stimulus announcement should be met with an even more massive sell off… It needs to happen. This b.s. should not be tolerated anymore…

      This debt deleveraging needs to just hurry up and happen already… A few more years of postponing the inevitable is only going to make things worse…

      I’m most frustrated b/c I have friends who still think everything is a-ok and even out looking for more “bargains” to buy…

      Take care!

  • The DudeNo Gravatar January 22, 2016, 7:27 pm

    The reason why markets rally in response to Draghi’s remarks is because it’s really great news for Greece! Stimulus is exactly what they’ve needed for a long time. Letting the free market run its course, is more or less exactly what’s happened for the last 7 years. Austerity clearly hasn’t worked. When you have 25%+ unemployment, what do you do to stimulate growth? Without growth, you don’t have a solution. You can’t cut spending and somehow stimulate growth. This is macroeconomics 101.

    So if Greece doesn’t have the ECB’s backing to do any kind of initiatives to stimulate growth, what are their options? There’s really only one: leave the Euro. Greece leaves the Euro, who else follows? Is Spain next? Does it call into question the feasibility of the Eurozone concept?

    So yeah, this is pretty good news. Especially for the people of Greece. It would be terrible to be young in Greece and have 45% youth unemployment and very few future prospects.

    And I don’t understand what you’re saying when you say that stimulus means kicking the can. That might be true in certain instances, but it’s definitely not a fair statement. It’s like saying that using a defibrillator is dumb because you’re just delaying the inevitable failure of someone with a bad heart in the first place. That’s just not the case. You use stimulus when you need to in order to get an economy going. It’s unfortunate the ECB didn’t do this much earlier when the US did. Perfect case study though for what you’re talking about.

    The economic principles you’re proposing are fringe and have been largely disproven.

  • Financial SamuraiNo Gravatar January 22, 2016, 8:12 pm

    Try to remove yourself from the market. Emotion will really derail you as an investor if you let it take control of you.

    • The DudeNo Gravatar January 22, 2016, 9:27 pm

      Sage advice

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