This move higher in prices comes in spite of the fact that the global economy, including within the United States is actually beginning to slow down, as the stress of the ongoing trade wars continues to weigh heavily on the system.
One of the major warning signs comes from the US manufacturing sector, which in recent months has taken a sharp turn lower, as recent reports indicate;
Typically a slowdown in US manufacturing is then followed by a slowdown in US non manufacturing sectors, which then leads to a cascading effect as a full blown recession sets in and takes hold of the economy.
Yet, despite these warnings and the risks that the world faces in the fourth quarter of 2019, the markets steadily and happily truck along, moving higher in price month after month.
This can largely be attributed to the direct, blatant manipulation that the Federal Reserve has been engaging in since the September scare in the overnight lending repo markets, in which the Fed had to intervene and come to rescue, preventing a crash within the banking sector.
Since this time, the Federal Reserve has continued to pump a monstrous amount of money into the system, doing what the Fed does best, throwing money at the problem and hoping to plug all leaks that appear with massive wads of cash.
Financial and geopolitical guru Jim Rickards recently tweeted out the following chart, which highlights just how rapidly the Fed's balance sheet has exploded higher;
This straight up move higher is due to the Federal Reserve injecting a stunning $175 billion in cash directly into the markets, pushing their balance sheet back up to $4.07 trillion, undoing much of their recent work in "exiting" the markets and proving my prediction correct, that once they tried to get out, the system would begin to fall apart and they would be forced back in.
This injection into the system coincidentally just happens to almost exactly match the 4% rise higher in the S&P 500, as the Fed's balance sheet has expanded by 4.5% since the Fed began once again to engage in "Not QE".
There is no getting out for the Fed, this is the system they have created and QE to infinity is here to stay. They are trapped.
This is the system we now find ourselves in. One that is completely broken and rotten just underneath the surface, papered over with ungodly amounts of fiat currency.
Ray Dalio isn't wrong. The world truly has gone mad and it is only a matter of time before the day of reckoning arrives, sending inflation soaring higher, markets reeling and precious metals rocketing higher.
Until that day, enjoy the discounts, keep stacking and keep preparing.
- As first seen on the Sprott Money Blog