What happens to price in a bidless market? It goes off a cliff.
As you probably know by now, it turns out lemmings didn’t voluntarily commit mass suicide: they were driven off the cliff by those in charge. Lemming Suicide Myth: Disney Film Faked Bogus Behavior.
Investors in stocks, bonds and real estate are being herded off the cliff by the Federal Reserve. The name of the game in the New Normal is to force investors large and small into risk assets. When the risk assets blow up, the herd plunges headlong over the cliff en masse.
Virtually every statistic and every public utterance by Federal Reserve spokespeople or mouthpieces is designed to persuade us of several untruths–untruths that are the essential foundation of the vested interests benefiting so mightily from the corrupt, unsustainable status quo:
- The official statistics–unemployment, GDP, etc.–are accurate reflections of actual economic activity.
- Risk assets (stocks, bonds and real estate) are no longer risky because “the Fed has your back.”
- Too big to fail/jail corporations are the foundation of our prosperity, so no expense will be spared to bail them out and restore corporate balance sheets and profits.
That each of these propositions is self-evidently untrue creates a massive problem for the Fed:Â the Fed and its minions must overcome the weight of truth with propaganda and persuasion–and if that fails, then it must strip anyone who dares leave the herd of any safe returns on their capital.
In other words–if you leave the risk-on herd, you lose any hope of low-risk returns and if you manage anyone else’s money, you also lose your job.The Fed is herding the crowd with financial tasers, causing anyone who veers away from the risk-on herd financial pain.
Anyone who dares to bet against the risk-on herd and the Fed: you will be destroyed.
This mass herding of investor behavior with the rewards of pseudo-safety in risk assets and the punishments of near-zero-yields on low-risk assets has a downside: when risk assets fall out of favor–that is, when risk once again becomes visible–there are no buyers left, as everyone seeking a return was funneled into risk assets long ago.
