Dennis Gartman
September 22, 2016

"Zimbabwe-isation" of the Global Capital Markets

SHARE PRICES ARE SHARPLY HIGHER ONCE AGAIN, as all ten of the markets comprising our International Index have risen over the course of the past twenty four hours with the markets in “The Americas” leading the way higher with the S&P rising a bit more than 1%; with stocks in Canada rising 1.3% and with the market in Brazil willingly overcoming the political confusion there to rise 1.1%. That strength, rather obviously, follows the non-decision by the Federal Reserve Bank to avoid any thoughts of tighter monetary policies until December… if even then. That non-decision decision gives “aid and comfort” to other central banks around the world to be as aggressive as they wish to be in order to sponsor economic growth, employment growth and inflation when and where they are able.

We are, it seems to us, entering the period we shall call the “Zimbabwe-isation” of the global capital markets and we say that with all sincerity… and requisite trepidation… recalling that the Zimbabwe stock market led the world to the upside several years ago as the central bank there lost all control of its money supply and created a massive, rampant inflation that sent the Zimbabwe dollar into oblivion but sent the Zimbabwe stock market soaring 5 at the same time. The process was ill-advised and everyone, everywhere knew that eventually the structure would collapse and that share prices would eventually plunge; but while the process was being played out one had no choice but to play the Zimbabwe stock market from the long side. We are there now, it seems to us, in the stock markets of the advanced world, with the monetary authorities continuing their expansionary policies and with “money” fleeing into the stock markets.

This will end badly of course. These things always do, but until they end… until the music finally stops… the game has to be played and the music, as it plays, has to be enjoyed. We can wail and gnash our teeth as we wish; we can be Jeremiah on the sidelines crying that this shall end badly and telling anyone and everyone that this game must be avoided because it will eventually end badly, but we must always remember that Keynes told us that “The market can remain irrational far longer than we can remain solvent.”

The market is indeed irrational. The music will indeed eventually end. The great game of musical chairs will come to a swift and violent stop as the musicians suddenly put their instruments down and as the participants in the game all try… vainly… to find a seat. Many will be hurt and most will be hurt badly at that point, but that point may be months… perhaps even years, or maybe only days… away. Until then, the music’s still playing; the champagne’s flowing and as Wayne and Garth used to say, “Party on!”
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