Juggling Dynamite

It is our view the main risk to equity prices today is that they are over-valued relative to global growth and earnings prospects, and that is the case even before the US feels any government cuts slated for 2013. The following discussion explains the issues well. Richard Cookson, global CIO at Citi Private Bank, explains to CNBC the current bubble-like nature of U.S. equities. Here is a direct link.

This clip starts with an update on the latest round of ineffective discussions in Europe this morning, and continues into a very refreshing discussion on the reason that the financial crisis has so far found no healing.

Jon Moulton, chairman of Better Capital, gives his views on why the euro zone crisis never ends: because banks, companies and bankrupt countries are not allowed to fail. Here is a direct link.

Our firm has been pointing out the escalating capital risk of low and declining volume in capital markets since 2009. This is not the way an organic bull market is supposed to move. A declining pool of legitimate buyers warns of danger to investment capital. There are several good reasons for low participation rates which include:

• An investing public who has been repeatedly harmed since the secular bear began in 2000, continues to steadily withdraw month after month what’s left of their savings, firing the legion of inept advisers and managers who keep offering their clients return-free risk for a fee.
• Insufficient controls and transparency on profit-desperate exchanges, have led to a casino-world where skimming machines drive 70 to 80% of trading volumes in split-second phony transactions.  This activity has increasingly led legitimate investors to move to the sidelines.
• Central bank-goosed asset markets that are decoupled from economic reality, present unattractive investment prospects to those who have capital to loose and the training and discipline to assess return probabilities.  “Smart cash” continues to pile on the sidelines waiting for rational risks worth taking.  Where there is nothing good to do, patient capital is prepared to wait for more rationale prices while the desperate, naive and reckless continue to “play” on ever-thinning ice.

Scarlet Fu displays the declining volume across multiple markets which has been falling since 2010. Here is a direct link..