Suddenly, the NASDAQ is on the way down with the FAANG stocks leading the way. Admittedly, you could hardly call this a trend -- two day runs down or longer do not a negative tech market make. But you have to worry about earnings and reports that a plurality of NASDAQ stocks will report, or have already reported, negative quarterly earnings. That's a reason for at least a pause in bullish investor psychology.
For my part, I expect the mother of all crashes to come within a matter of a few weeks, if not next week. I don't base it on the traditional business cycle of boom and bust. Rather, I see The Fed as the ultimate doom machine for these markets. Here's why: The Fed's counterfeiting cannot prevent a severe recession, or more likely, an unheard of Depression, because inventing liquidity and being both the buyer and seller of last resort of anything and everything is quite simply financial idiocy. You saw it first with the voluntary purchase of junk bonds and other non-investment grade products. Absolute insanity. The next clue came when The Fed tried to repeatedly taper -- that had the same effect as taking away a pacemaker from an otherwise dying patient who suffers from chronic cardiac insufficiency. You turn it off and the patient likely dies. And so it was with markets -- tapering immediately led to market cardiac arrest and investor panic. That clearly showed that QE to Infinity is exactly that: it has to go on forever otherwise markets tank to unprecedented levels to accurately reflect the true nature of the DOA American economy.
The Fed did not follow the old adage of being careful of what it wished for and now they are seemingly committed in perpetuity to artificially holding up markets that would otherwise have already been destroyed ages ago.
Like in 2008, Fed intervention lessened the severity of the crisis and put off the eventual date for a considerable market collapse, which ultimately came in spite of their various interventions in capital markets. In 2020, multi-trillion dollar infusions will have exactly the same effect until they don't. Because of the unprecedented monetary levels of Fed intervention, not only will the crash be delayed but its energy when it finally comes will have been pent up and considerably magnified. So, when it inevitably hits, it likely hits with ten times the force it normally would have had but for QE, MMT and the widely expected Yield-curve control.
Despite the monetary lunacy, the markets have reasonably held the line subsequent to the March lows. That's because Fed policy has encouraged increased deflation. But ominous signs lie ahead with The Fed purportedly prepared to allow inflation to push ahead of its traditional core inflation target of 2%. That's called The Fed playing Russian roulette with the markets and the economy. If inflation begins to take off, it will be game over for this economy already on life support. First will come stagflation and ultimately hyperinflation should The Fed lose total control.
All of this to say that the FAANGs are probably the canaries in the coal mine and NASDAQ earnings the big bad wolf approaching the hen house. In my book, now is the time to get out fast if you haven't already done so. Pray that stock markets don't drop 70-80% because if it comes, or should I say when it comes, the bear market could very well be of that order of magnitude.
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