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By Gregory Mannarino TradersChoice.net
Ask 90 percent of people what drives the price of stocks, and invariably you will hear things like “earnings, PE ratios, forward guidance.” The truth is this, today it’s none of these things.
Earnings, PE ratios, forward guidance in today’s market plays almost NO ROLE in the price action of any given company’s stock price. The number one driver of stock prices is the price action which exists in the debt market. In fact, the entire stock market itself derives its value from action in the debt market, therefore the entire stock market is a derivative of the debt market ITSELF.
To push this point home, consider this. Central banks, ever since the stock market crash/financial meltdown of 2008, have chosen to artificially suppress rates in what has been a very successful scheme to re-inflate a truly epic bubble in stock and real estate prices.
When a central bank suppresses rates it creates an environment of risk, forcing cash into risk assets like stocks, it also inflates the price of real estate. This artificial suppression of rates mechanism has also robbed savers of trillions of dollars in realized wealth, by keeping savings rates WAY below the actual rate of inflation.
Central banks artificially suppressing rates ever since the last meltdown is now today manifesting itself in the form of skyrocketing global inflation, and a freefall world economy.
Central banks are responsible for the global financial and economic systems, both of which are inextricably connected. Moreover, central banks working in concert are deliberately driving the world right into a financial/economic crisis of truly epic proportions.
Central banks have been and continue to work meticulously and intentionally to hyperinflate a monster, the global hyper-bubble in debt.
Cracks in this hyper-bubble are now showing themselves, especially as of late, in the form of rapidly rising global bond yields. Rapidly rising bond yields are the product of a sell-off in the debt market, and this in turn is putting pressure on global stock prices.
It is only a matter of time before an EXTREME sell-off in the debt market occurs. An extreme debt market sell-off will not just cause the stock market to suffer its biggest crash in history! But will also rock the entire global financial/economic systems to its core.
A stock market crash on the back of a meltdown in the debt market will occur at some point, and we are seeing cracks in the debt market hyper-bubble now. But a stock market crash—even of this magnitude, is the least of the problem. The real issue is a complete lock up of the entire financial system WORLDWIDE, which means ALL TRANSACTIONS STOP. No cash available from the banks, credit cards and ATM cards no longer work, no lending, everything FULL STOP, and rapidly.
Make no mistake, central banks are intentionally working towards this inevitable end to the current system(s) only to usher in a new system with much more control.