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,
ZeroHedge.com
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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