Be very wary of all-time high stock prices as much of their volume is coming from direct central bank funding
Over the past 12 month, equity prices in the stock markets have soared to new all-time highs while insider selling continues to be a constant. ¬†And despite the propaganda being tossed out by the mainstream business networks that purchases of equities are finally coming from ‘money held on the sidelines’, the reality is that the only thing propping up stocks is the record amount of money being printed by central banks around the world who are either purchasing stocks themselves, or are facilitating the purchase of stocks.
Welcome to the same 2007 bubble scenario that the central banks created for housing, only now its moved over into stocks 10 years later.
One month ago, when observing the record low vol coupled with record high stock prices, we reported a stunning statistic: central banks have bought $1 trillion of financial assets just in the first four months of 2017, which amounts to $3.6 trillion annualized, “the largest CB buying on record” according to Bank of America. Today BofA’s Michael Hartnett provides an update on this number: he writes that central bank balance sheets have now grown to a record $15.1 trillion, up from $14.6 trillion in late April, and says that “central banks have bought a record $1.5 trillion in assets YTD.” – Zerohedge
Of course, this massive increase in equity purchases by central banks are not simply limited to Federal Reserve as both the ECB and the Bank of Japan have been printing an estimated $200 billion per month to buy stocks since they have run out of sovereign and corporate bonds to channel their stimulus into. ¬†And this of course has helped to not only create massive bubbles in equities, but to completely disconnect these markets from any sort of corrections that are always necessary in a healthy market.
What we are finally seeing is the true warning made by Thomas Jefferson 200 years ago when he said, “”If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.” ¬†And since the Fed alone owns millions of homes and properties now through their buying of mortgage backed securities from the private banks back in 2011, and have expanded this into owning Treasuries as well as stocks… all with money printed out of thin air to the tune of trillions of dollars, very soon the central banks that were created over 100 years ago to simply be a lender of last resort and to regulate interest rates will have morphed into entities that will one day control most of the wealth and property of the U.S., Europe, and Japan.
Kenneth Schortgen Jr¬†is¬†a writer for The Daily Economist, Secretsofthefed.com,¬†Roguemoney.net, and Viral Liberty, and hosts¬†the popular youtube podcast on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.