Executive Summary

• Long-suppressed market forces are suddenly coming unleashed
• Why the status quo of the past decade is ending fast
• What's most likely to come next
• How much damage would a true "market crash" wreak?

If you have not yet read Has “It” Finally Arrived?, available free to all readers, please click here to read it first.

The central banks did the entire world (and future generations) a disservice by suppressing market volatility.  Extraordinary, unprecedented levels of complacency developed and nothing ever really seemed to happen except the stock and bond markets climbed steadily higher.

The phrase "The worm has turned" applies to someone who has accepted a lot of bad treatment from other people without complaint who suddenly decides they are no longer going to accept the situation.

The markets were calm, and placid, but the deformations and pressures continued to build and now the worm has turned.  Or at least appears to have turned.  While US equities may try for another run at the highs, the market internals are lousy, too few companies are leading the charge, and everything just seems worn out.

Elon Musk is now seeming to have tipped from intriguingly eccentric to borderline unhinged, Netflix’s story still doesn’t make a lick of sense, and Apple sells wildly overpriced phones that are anything but impossible to recreate.  For the record, I use a Huawei product (the Mate 10) and it’s a fantastic phone and half the price of an Apple product that does less.  Probably even with the same Chinese spy chips on it as Apple, the difference being nobody will be surprised if a Chinese product comes with spy chips pre-installed, I guess.

Broken Markets

Part of the reason that we’ve been so cautious about having money in the financial markets is because, frankly, we don’t trust them. 

The vast majority of trading now is performed by computer algorithms, and upwards of 90+% of all quotes are generated by these programs. 

These machines are literally as fast as light, and they only care about making money.  In the good old days (like 7 or 8 years ago) actual humans and market makers were involved and they had a vital role in creating bids in otherwise bidless markets.