Tag Archives: Swiss National Bank

Central Bank Interventions Have Become Extreme

There are no markets anymore – only interventions.  – Chris Powell, Treasurer of GATA

Markets are supposed to act as information transmission mechanisms, with asset prices reflecting all of the fundamental information that goes into the process of “price discovery.”  But when Central Banks and Governments interfere – or intervene – in markets, it completely disrupts the information transmission, price discovery function of markets.

If Central Banks and Governments interfere with markets, there’s no reason to even have markets and it becomes completely useful to participate in financial markets in any capacity, unless of course you have access to the inside information connected to the market intervention.

The extreme volatility of the markets right now is nothing more than 100% evidence of Federal Reserve intervention in U.S. markets.  It also reflects the extreme degree to which the Fed is interfering and manipulating the markets.  Take yesterday for example:

This intra-day graph reflects the tug-of-war that occurred among the Fed’s interventions to prevent the market from a catastrophic drop, the hedge fund algo programs trying to time the Fed’s interventions and the rest of the market trying to unload extremely overvalued stocks.   That demonstrates the degree to which the U.S. capital markets have gone completely off the rails.

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It is now widely understood and accepted that Central Banks are actively buying stocks in order to support the equity markets.   Japan openly admits this.  The Swiss National Bank files SEC 13-D filings disclosing its purchases.

If central banks purchase stocks in order to support equity prices, what is the point of having a stock market? The central bank’s ability to create money to support stock prices negates the price discovery function of the stock market.

Dr. Paul Craig Roberts and I co-authored a report which discusses the issue of Central Banks buying stocks.  As it turns out, the Fed is likely the entity funding the Swiss National Bank’s purchases of stocks like Apple and Google.  You can read the entire article here:   Central Banks Have Become A Corrupting Force

With Central Banks attempting to control the direction of markets as a means of dictating policy, it has made any participation in the financial markets completely meaningless.

This will not end well.  History tells us there’s a limit to a Government’s ability to manipulate markets.  At some point the money printing and market support mechanisms will fail and the result will be much worse than if they had let the markets freely determine the outcome.  It’s not a question of “if,” it’s just a question of “when.”

“AAPL Is Crashing – It May Be Over”

We’re dying to see Icahn’s next filing on Apple. The fact that Carl has not Tweeted anything on Apple since June 24 is interesting. – The King Report, M. Ramsey Securities, Aug 4, 2015

AAPL has been by far the biggest contributor to the run-up in the stock market since the Fed began printing trillions of dollars to save the big banks and reinflate every paper-fueled financial bubble that has infected our economic system since the mid-1990’s. While everyone points to Bernanke as being the “king of the printing press,” the Maestro himself, Alan Greenspan, worked his “maestro-ism” by pressing down hard on the money-printing accelerator in order to “fix” every big financial collapse since the 1987 stock market plunge.

Now one-by-one the bubbles are popping. EU sovereign debt and the Chinese financial system are clearly the most visible for the time being.  It also looks like the pancreatic financial cancer that took down Greece has now invaded Spain.

But the bubble-popping pin is also starting to invade the U.S. economy. One has to wonder if the Obama Government will invoke the “national security clause” of the Patriot Act and try to incarcerate the bubble-popping-pin without a judicial hearing at Guantanamo (the Guantanamo that Obama promised to close after he was elected in 2008). Maybe Wesley Clark will suggest putting the bubble-pin in an internment camp…

The poster-child for the U.S. financial system bubble has been AAPL.  Aside from Carl Icahn pimping his big position in the stock for a few years, Wall Street money slaves have tripped over themselves to drool over the Company’s overpriced cellphones and computers.  Not only is the price of AAPL stock a bubble, but it is a bubble in marketing, shameless promotion and the amount of unused tech gadget computer power for which the AAPL cult adherents happily pay – often with credit.

While no one knows which coming event will ultimately crash the U.S. financial system, the economy is clearly receding deeper into recession.  The GDP bounce reported for Q2 is nothing more than statistical smoke and mirrors fabricated by Government statisticians and Orwellian propaganda.  Every private-sector economic metric is now showing declines further into negative territory.  Today, for instance, factory orders plunged for the 8th month in a row, down 6.2% for June vs. June 2014.

Along with the deteriorating economy, the dislocation between the fiction of stock market valuations and the reality of Main Street continues to widen.  This will not have a happy ending.  The law of “regression to the mean” will at some point assert itself in brutal fashion and the multiple paper-fueled financial bubbles blown by the Fed will pop and decimate our entire system.

I doubt AAPL will be the trigger, but anyone blindly bullish on the stock market has to take notice of the 15% plunge in AAPL’s stock since its recent all time high:

AAPL

With Carl Icahn likely selling furiously, if not out of his position entirely, and every large hedge fund over-weighted in AAPL, who will catch the falling knife?  If the Fed or the Swiss National Bank does not insert a safety-net – and it appears as if the SNB is already filled on AAPL paper – AAPL has a long way to fall before it reaches a fundamental price that makes any sense.  Of course, the same can be said for the entire stock market…

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