Never ever have seen such a market,or better such an easy market. No risk market, everyone gets a free ride.This is not anymore a free market, something feels wrong but a few say so. The DOW doesn’t retreat an inch, looks like is making a point about it. No investor is afraid and everybody remain invested in the market despite domestic and international potential disruptive issues. The DOW is on a iperbolic run; just check the MONTHLY chart above; it speaks by itself. My guess is that algo trading, ETF and the vast liquidity injected have completely distorted the free market that, at this stage, can’t allow a significant drawback. As a recent Thomson Macquarie research explain that for the markets “This implies that liquidity must continue to grow, volatilities must be controlled and neither demand nor supply can yield higher cost of capital. Thus, risks facing investors are that either [central banks] and/or China misjudge extent to which reflation is dependent on inflating asset values and China’s fixed investment. We remain constructive on financial assets, not because we believe in a sustainable recovery, but because we back the perpetual leveraging ‘doomsday’ machine.” This is not going to end well. In the meantime follow the crowd and be ready to exit… fast if you can.
