The collision of global markets and social mood

Wednesday, September 24, 2014

Art Records, IPO Records, World Bank Records

Not only are some measures of investor sentiment setting records for all-time high levels of bullishness (such as Investors Intelligence), ebullience is also being shown in the art market.

The contemporary art market just broke through the $2-billion mark for the first time, up 40 percent on the previous year.

Meanwhile, ever wonder where the World Bank gets all its money? It borrows it, just like anyone else. Oh, also it takes fees from its member countries (from which it also extracts sovereign immunity from all legal actions arising from its inept policies), but it's subject to the same social mood forces that drive others.

So it's interesting to note this small tidbit from American Banker:

The World Bank and other so-called supranational financial organizations have raised about $219 billion on global debt markets this year, the largest amount since records started being kept. Part of the reason for the surge is the amount that was raised for European bail-outs. But the amount is up also because of the demand for high-quality bonds.

I added a little emphasis.

The point is that social mood is what makes people confident enough to see into the future . . . and borrow against it.

When mood craters, the process reverses. It's conceivable that organizations like the World Bank and the IMF could cease to exist in an extended downturn. Sounds bizarre, but it could happen.

Not yet though. At the high end mood is still fostering more more more, while at the other end of the spectrum it seems to be inspiring less less less.

It makes sense that IPOs have set a 10-year record issuance, according to Renaissance Capital, while money is essentially free. It also makes sense that the Baltic Dry Index (which basically measures stuff moving around the globe) is still nowhere as the rest of the world, which can't borrow to make ends meet, is simply buying less.

I keep an eye on the Baltic Dry Index for that reason. It gives a truer read and can't be manipulated by the Fed or anyone else. It just is. And it ain't pretty.

Still the e-mini had a chance to break its 1968 swing point yesterday at the close and was saved by 25 ticks. Someone slammed over 100,000 contracts during the final 10 minutes and still couldn't break it.

I see a market possibly under the temporary influence of the 50dma and a 38% Fib level. If the September 15th swing point holds (1978.48), the S&P could be in the process of forming a triangle before higher highs. I may try to make some call buys using 1982.77 as a stop.

A break of 82.77 could see a quick test of 78.48.

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