Fasanara 2019: Markets In Critical Transformation, Chaotic Behaviour Has Just Began…”a market crash is incubating, and the cliff is near.”

Saturday, January 12, 2019
By Paul Martin

Via Fasanara Capital,
Sat, 01/12/2019

A Glimpse At 2019​​

Markets In Critical Transformation, Chaotic Behaviour Has Just Began.

>Our inability as market participants to properly frame market fragility and the inherent vulnerability of the financial system makes a market crash more likely, as it helps Systemic Risk go unattended and build further up. For the first time in a while, elusive economic narratives started to fail at blaming market weakness on secondary-order factors: Trade Wars, the FED, Oil prices. Attempts at dismissing market events as no more than a temporary turbulence miss the bigger picture and cast the fishing net on unaware investors looking for a dip to buy. In contrast, over the last month, conventional market and economic indicators (e.g. breaks of multi-year equity & home price trend-lines, freezing credit markets, softening global PMIs/orders) have all but confirmed what non-traditional measures of system-level fragility signalled all along: that a market crash is incubating, and the cliff is near. Nothing has happened yet.

1. Early Tremors, Not Market Bottoms

After a slow start, the season of market chaos has taken off.

In the last few months, global markets have visibly entered the ‘phase transition zone’, a process of critical transformation that will eventually lead to a new equilibrium at significantly different levels, after severe ruptures and a possible full-cycle market crash.

Rather than ‘a short-term correction in a structural bull market’, or a ‘temporary turmoil in healthy economic conditions’, this is the beginning of a structural adjustment after a decade of liquidity abundance and market manipulation, which reflexively changed the structure itself of the market for private investors in hazardous ways, making it insensitive to fundamentals, passive or quasi-passive, overly-correlated and overly-concentrated. In a word, ‘Fake Markets’ have now reached their nemesis and have woken up from a long lethargy. Fake Markets are defined, as of mid-2017, as ‘markets where the magnitude and duration of artificial flows from global Central Banks or passive investment vehicles have managed to overwhelm and narcotize data-dependency and macro factors. A stuporous state of durable, un-volatile over-valuation, arrested activity, unconsciousness produced by the influence of artificial money flows.’

The Rest…HERE

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