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CREDIT - Sub-Prime Auto Lending

Subprime Lending Drives Spending 06-13-14 House Of Debt via SA

A concern that we highlighted in yesterday's post is that the only way the U.S. economy can generate significant consumer spending is through aggressive lending to borrowers with low credit scores. Here is more evidence supporting that view.

In the chart below, we plot retail spending on appliances, furniture and home improvement, or "home-related spending" (blue line) and spending on new autos (red line) from 1998 through 2014. We have highlighted the two major subprime lending booms we've seen in that period - the subprime mortgage lending boom from 2003 to 2006, and the subprime auto loan boom from 2010 to 2014. In order to be able to include 2014, we focus only on the first four months of each year.

(click to enlarge)

When subprime mortgage lending was booming from 2003 to 2006, so were purchases of home-related goods. As soon as the subprime mortgage lending market crashed, so did home-related spending. In fact, in 2014, home-related spending is still below its 2006 level in nominal terms. It's a pretty incredible boom and bust.

For auto spending, growth was positive prior to the Great Recession, but unspectacular. But as soon as subprime auto lending heated up in 2011 and afterward, so did purchases of new auto vehicles. The growth in new auto sales from 2011 to 2014 has been really impressive. So once again, spending in a particular market is strongest when subprime lending in that market is strongest.

It appears that the key to boosting spending in the U.S. economy is subprime lending.

The financial system was lending against homes before the Great Recession, and now it has moved to lending against cars. But the basic message is the same.

CREDIT - Subprime Auto-Lending Credit Bubble Is Bursting

The Subprime Auto-Lending Credit Bubble Is Bursting 06-13-14 Pater Tenebrarum of Acting-Man blog via ZH

We have commented a few times on the slightly diffuse character of the echo bubble, which has infected a great many nooks and crannies of the economy. One of the areas which has experienced an enormous boom was the sub-prime auto loan sector. It seems however that the party in this sub-sector of the bubble economy is in the process of ending.

According to Bloomberg:

“A three-year lending boom to car buyers with spotty credit that helped push auto sales to a six-year high is starting to show signs of overheating.

The percentage of loans packaged into securities that are more than 30 days late rose 1.43 percentage points to 7.59 percent in the 12 months ended September 30, according to Standard & Poor’s. That’s the highest in at least three years, the data released last week by the New York-based ratings company show.

“We’re at this inflection point,” Amy Martin, an analyst at S&P, said by telephone. “Now that they are opening the lending spigot, it’s only natural that losses are starting to rise.”

Underwriting standards began to decline amid five years of Federal Reserve stimulus that set off a race for higher-yielding assets, spurring a surge in issuance of bonds tied to subprime auto loans. That breathed life into a car-finance business that had contracted in the wake of the credit crisis, attracting new lenders and private-equity firms such as Blackstone Group LP with cheap funding and high margins.

Delinquencies on subprime auto loans are likely to have increased more during the fourth quarter, the holiday period when consumers typically stretch their budgets, according to S&P. That’s poised to increase losses that bondholders will take from defaults on the debt, which stood at 6.92 percent at the end of September after falling to as low as 4.15 percent in 2011, S&P data show.

“Many lenders have told us that their performance in recent years exceeded their expectations,” Martin wrote in a report last month. “We are now hearing that they expect losses to trend upward to more normal levels this year and next.”

[…]

Subprime lenders have found cheap funding in the bond market, with $17.6 billion of asset-backed securities tied to subprime auto loans issued last year, more than double the $8 billion sold in 2010, according to Barclays Plc. About $3.6 billion of the securities have been offered this year, according to data compiled by Bloomberg.

(emphasis added)

We wonder of there is any pie Blackstone doesn't have a finger in these days… Anyway, it seems investors in these loans – after enjoying above average returns for a good while – must now brace for growing losses. That 'underwriting standards have declined' is really no surprise – that is what happens when the Federal Reserve prints wagon-loads of money and pressures short term interest rates to zero. In fact, this decline in lending standards was arguably one of the main goals of the policy.

However, what interests us about this development is mainly this: it shows that the credit bubble is beginning to fray at the edges. Every downturn starts with a seemingly innocuous report about things 'suddenly' and 'unexpectedly' going wrong in a relatively obscure corner of the market. We find ourselves reminded of how sub-prime real estate credit troubles began to show up for the first time in February of 2007, leading to the often repeated mantra that this particular disturbance in the force was 'well contained'.

That is however never how it works – in the end, it is all one big interconnected market. When troubles begin to show up at one end of it, they soon tend to  begin to spread.

A car repo notice – at least the repo sector can expect a boom now.

Good-bye overpriced SUV piece of junk – it was nice to know ye while it lasted …

One should certainly keep both eyes open henceforth; more anecdotal evidence of this type is likely to emerge in coming months, especially if the Fed continues with its 'QE tapering' course. Once problems become visible in one obscure corner of the low grade credit markets, it is often a warning sign for the entire market and economy.

MACRO GROWTH -"Cluster Of Central Banks" Have Secretly Invested $29 Trillion In The Market

"Cluster Of Central Banks" Have Secretly Invested $29 Trillion In The Market 06-16-14 ZH

Another conspiracy "theory" becomes conspiracy "fact" as The FT reports "a cluster of central banking investors has become major players on world equity markets." The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms 

$29.1T in market investments, held by 400 public sector institutions in 162 countries,

which "could potentially contribute to overheated asset prices."

China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as

the world's banks try to diversify themselves and "counters the monopoly power of the dollar." 

Which leaves us wondering where are the central bank 13Fs?

While most have assumed that this is likely, the recent exuberance in stocks has largely been laid at the foot of another irrational un-economic actor - the corporate buyback machine. However, as The FT reports, what we have speculated as fact for many years now (given the death cross of irrationality, plunging volumes, lack of engagement, and of course dwindling credibility of central planners)... is now fact...

Central banks around the world, including China’s, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions.

“A cluster of central banking investors has become major players on world equity markets,” says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif), a central bank research and advisory group.The trend “could potentially contribute to overheated asset prices”, it warns.

...

The report, seen by the Financial Times, identifies $29.1tn in market investments, including gold, held by 400 public sector institutions in 162 countries.

...

China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, as the report argues is “partly strategic” because it “counters the monopoly power of the dollar” and reflects Beijing’s global financial ambitions.

...

In Europe, the Swiss and Danish central banks are among those investing in equities. The Swiss National Bank has an equity quota of about 15 per cent. Omfif quotes Thomas Jordan, SNB’s chairman, as saying: “We are now invested in large, mid- and small-cap stocks in developed markets worldwide.” The Danish central bank’s equity portfolio was worth about $500m at the end of last year.

Read more here

So there it is... conspiracy fact - Central Banks around the world are buying stocks in increasing size.

To summarize, the global equity market is now one massive Ponzi scheme in which the dumb money are central banks themselves, the same banks who inject the liquidity to begin with.

That would explain this.

That said, good luck with "exiting" the unconventional monetary policy. You'll need it.

GLOBAL GEO-ECONOMICS - "Belgium" Treasurys Post First Decline Since August

Chinese Treasury Holdings Drop To Lowest Since February 2013 As "Belgium" Treasurys Post First Decline Since August 06-16-14 ZH

With everyone expecting "Belgian" US Treasury holdings to surge by another inexplicable double-digit billion amount, and surpass $400 billion in what has been the most aggressive, and secretive, accumulation of TSYs by an unknown third-party using the Belgian jurisdiction as venue via Euroclear, the April holdings of the small European country posted their first drop since August. According to the TIC data released moments ago, total "Belgium" holdings - the third largest after China and Japan - declined by $15 billion in April, to a new grand total of $366 billion.

Offsetting this drop, almost to the penny, was the first increase in Russian paper which after posting its largest decline in history in March for reasons well-known, saw a $16 billion increase from its cycle lows of just $100. Still, this was a 22% decline from Russia's holding as of a year ago. Furthermore, considering the deterioration in relations between Russia and the US since April, it would not surprise anyone if this blip in Russian TSY holdings is quite transitory, and the May data shows that Russian holdings have already dipped into double digit range.

Finally, looking at the top two holders of US paper, Chinese holdings declined from $1272.1 to $1263.2, the lowest Chinese total holdings since February 2013, which once again was offset almost to the dollar by Japan, whose holdings increased by $10 billion to $1209.7 billion - just shy of the insolvent island's largest US paper holdings on record.

TICS REPORT - June 16th, 2014

Enlarge

ANALYTICS - Breadth A Serious TellTale

RETAIL CRE - Darden Results Disappoint as Olive Garden Sales Keep Declining & Sells Red Lobster

Darden Results Disappoint as Olive Garden Sales Keep Declining 06-20-14 WSJ

Restaurant Operator Plans to Unload its Struggling Red Lobster Chain

Darden Restaurants Inc. DRI -2.63% posted another period of declining sales at its Olive Garden and Red Lobster chains, while its quarterly earnings slid 35% thanks to higher costs and expenses.

The casual-dining restaurant operator's profit fell far short of market expectations. Darden said write-downs and the cost savings plan it unveiled in December hurt results by about 19 cents a share.

Darden also issued an earnings outlook for the recently started fiscal year that falls below the current consensus view. It expects a profit of $2.22 to $2.30 a share, while analysts polled by Thomson Reuters are looking for $2.79.

Darden plans to sell its Red Lobster chain for $2.1 billion to private-equity firm Golden Gate Capital. Bloomberg News

The company's Olive Garden and Red Lobster chains have struggled amid declining sales and traffic recently. In May, Darden said it would sell its Red Lobster chain for $2.1 billion to private-equity firm Golden Gate Capital. The company had previously disclosed its intent to separate the lagging chain, and its results were classified as discontinued operations in the most recent quarter.

Sales, excluding newly opened or closed locations, declined 3.5% at Olive Garden—the company's biggest chain by revenue— and 5.6% at Red Lobster for the period ended May 25. LongHorn Steakhouse posted 2.4% higher sales. For the new year, Darden projected flat to 1% sales growth at Olive Garden, while LongHorn is expected to see sales grow 1% to 2%.

Now that Red Lobster is being sold, Darden is focusing on improving operations at Olive Garden. The company is in the early stages of a major brand overhaul for the casual Italian chain of more than 800 restaurants. The chain has been introducing lower-priced items and smaller plates to appeal to younger and budget-conscious customers.

Olive Garden also is trying to speed up lunch service for time-pressed customers. It is testing online ordering for take-out customers that it plans to roll that out nationally by August. It also plans to begin testing table-top tablets guests can use to pay their bills.

Darden also has focused on its specialty-restaurant group, which includes higher-end chains such as Capital Grille and Bahama Breeze, to help it expand. Sales at the segment edged up 2% in the latest period, and Darden expects an increase of about 2% in the current year.

Two activist investors—Starboard Value LP and Barington Capital Group LP—had been calling for Darden to undergo a much more significant breakup, suggesting that the company separate its smaller chains from Olive Garden, Red Lobster and LongHorn, and place its real estate holdings in a new company.

In response to the planned Red Lobster sale, Starboard has sought to replace the majority of Darden's board members to put in place a turnaround plan for the company.

Overall, Darden reported a quarterly profit of $86.5 million, or 65 cents a share, down from $133.2 million, or $1.01 a share, a year earlier. Analysts polled by Thomson Reuters recently expected per-share earnings of 94 cents.

• Revenue rose 3.6% to $1.65 billion.
• Profit down from $133.2M to 86.5M
• Food and beverage costs rose 8.5%,
• Labor costs edged up 2.6%.
• Total costs and expenses increased 7.1% to $1.62 billion during the quarter.

FINANCIAL REPRESSION - How It Advances

John Hussman's Formula For Market Extremes 06-16-14 John Hussman's Weekly Market Comment via ZH

Market extremes generally share a common formula.

• One part Reality is blended with
• One part Misguided Perception (typically extrapolating recent trends as if they are driven by some reliable and permanent mechanism), and often
• One part Pure Delusion (typically in the form of a colorful hallucination with elves, gnomes and dancing mushrooms all singing in harmony that reliable valuation measures no longer matter). 

This time is not different.

TECH BUBBLE

REALITY: The technology bubble was grounded in legitimate realities including:

• The emergence of the internet and
• A Great Moderation of stable GDP growth and
• Contained inflation. 

MISGUIDED PERCEPTION: But it also created

• A misperception that it was possible for an industry to achieve profits while having zero barriers to entry at the same time (the end of that misperception is why the dot-com bubble collapsed),
• A misperception that technology earnings would grow exponentially and were not cyclical (as we correctly argued in 2000 they would shortly prove to be), and

PURE DELUSION:

• The outright delusion that historically reliable valuation measures were no longer informative.
• Meanwhile, the same valuation measures we use today were projecting – in real time – negative 10-year nominal total returns for the S&P 500 over the coming decade, even under optimistic assumptions (see our August 2000 research letter).

HOUSING BUBBLE

REALITY:

The housing bubble was grounded in legitimate realities including a boom in residential housing construction and a legitimate economic recovery that followed the 2000-2002 bear market (which we responded to by shifting to a constructive stance in April 2003 despite valuations still being elevated on a historical basis). 

MISGUIDED PERCEPTION:

But the housing bubble also created a misperception that mortgage-backed securities were safe because housing prices had, at least to that point, never experienced a major collapse. 

PURE DELUSION:

The delusion was that housing was a sound investment at any price. The same delusion spread to the equity markets, helped by Fed-induced yield-seeking speculation by investors who were starved for safe return. Meanwhile, the same equity valuation measures we use today helped us to correctly warn investors of oncoming financial risks at the 2007 peak (see A Who’s Who of Awful Times to Invest).

2008 CREDIT CRISIS

The 2008 credit crisis, which we anticipated, was more challenging for us because the extent of employment losses and gravity of asset price collapse was greater than we had observed in the post-war data that underpinned our methods of assessing the market return/risk profile. Our valuation methods didn’t miss a beat, and correctly identified a shift to undervaluation after the late-2008 market plunge (see Why Warren Buffett is Right and Why Nobody Cares). But examining similar periods outside of post-war data, we found that measures of market action that were quite reliable in post-war data were heavily whipsawed in the Depression, and even the valuations we observed at the 2009 market lows were followed, in the Depression, by an additional loss of two-thirds of the market’s value. My resulting insistence on ensuring our methods were robust to that “two data sets” problem was necessary, but the timing could hardly have been worse, with an initial miss in the interim of that stress-testing, and an awkward transition to our present methods of classifying return/risk profiles.

THE 'QE' ERA

REALITY:

The present market environment is grounded in the legitimate reality that the labor market has recovered its losses, but not to the extent that creates resource constraints or clear interest rate pressures. Though broad measures of economic activity have actually eased to year-over-year levels slightly below those that have historically distinguished expansions from recessions, the economy seems to be treading water, and don’t observe a particularly negative tone.

MISGUIDED PERCEPTION:

• The recent period has created a misperception that monetary easing itself will support financial markets regardless of their valuation. The error here is that we know from history that it does not. Indeed, the 2000-2002 and 2007-2009 collapses both progressed in an environment of aggressive and sustained monetary easing.
• What’s actually true about monetary policy is that zero-interest rate policy has created a perception that investors have no alternative but to “reach for yield” in riskier assets. It’s entirely that reach for yield that investors must rely on continuing indefinitely, because there’s no mechanistic cause-effect relationship between the Fed balance sheet and stock prices, bank lending, or economic activity.

PURE DELUSION:

As usual, the delusion is that this Fed-induced reach for yield is enough to make equities a sound investment at any price. Ironically, the Fed itself is in the process of reversing course on this policy.

Meanwhile, based on the same valuation methods that correctly projected negative 10-year returns at the 2000 peak, correctly gave us room to shift to a constructive position in early 2003, correctly helped us warn of severe market losses at the 2007 peak, and correctly identified the shift to market undervaluation in late-2008 (which those who don’t understand our stress-testing narrative may not recognize), we currently estimate prospective S&P 500 nominal total returns of just 2% annually over the coming decade, and negative returns on every horizon shorter than about 7 years.

In short, investors who are reaching for yield in stocks as an alternative to risk-free assets are most likely reaching for a negative total return in stocks between now and about 2021.

FLOWS - Asset Shortages and Liquidity Becoming An Increasing Problem

"Liquidity Is Becoming A Serious Issue" As Japan's Bond Market Death Goes Global 06-16-14 Zero Hedge

While we noted last week the death of the Japanese bond market as government intervention has killed the largest bond market in the world; it is now becoming increasingly clear that the dearth of trading volumes is not only spreading to equity markets but also to all major global markets as investors rotate to derivatives in order to find any liquidity.

Central planners removal of increasing amounts of assets from the capital markets (bonds and now we find out stocks), thus reducing collateral availability, leaves traders lamenting "liquidity is becoming a serious issue."

While there are 'trade-less' sessions now in Japanese bonds, the lack of liquidity is becoming a growing problem in US Treasuries (where the Fed owns 1/3rd of the market) and Europe where as JPMorgan warns, "some of this liquidity may be more superficial than really deep."

The instability this lack of liquidity creates is extremely worrisome and likely another reason the Fed wants to Taper asap as DoubleLine warns, this is "the sort of thing that rears its ugly head when it is least welcome -- when it’s the greatest problem."

As Bloomberg reports,

Japan's bond market is dead... and so is its stock and FX markets...

The Bank of Japan’s unprecedented asset purchase program has released a creeping paralysis that is freezing government bond trading, constricting the yen to the tightest range on record and braking stock-market activity.

...

“All the markets have been quiet,” said Daisuke Uno, the Tokyo-based chief strategist at Sumitomo Mitsui Banking Corp. “We’ve already seen the BOJ dominance of JGBs since last year, but recently participants in currency and stock markets are also decreasing as those assets have traded in narrow ranges.”

...

“The flows on both the buying side and selling side continue to fall,” said Takehito Yoshino, the chief fund manager at Mizuho Trust & Banking Co., a unit of Japan’s third-biggest financial group by market value. “Falling volatility is a very serious problem for traders and dealers who are unable to get capital gains.”

The US is getting that way as the Fed owns one third of the market...

and the world shifts to derivatives trading to find liquidity...

The boom in fixed-income derivatives trading is exposing a hidden risk in debt markets around the world: the inability of investors to buy and sell bonds.

While futures trading of 10-year Treasuries is close to an all-time high, bond-market volume for some maturities has fallen a third in the past year.

And Europe is not much better...(via Bloomberg)

Some cracks emerged in Europe last month, when investors dumped Italian, Spanish and Greek debt on speculation political parties opposed to the European Union would gain seats in parliamentary elections and derail the euro area’s recovery.

As the selloff intensified and liquidity decreased, the disparity in yields of 10-year Italian bonds between buyers and sellers based on bids and offers doubled to 6 basis points, or 0.06 percentage point, on May 23, the highest this year.

Market participants are growing increasingly weary...

“That has to bite and prevent dealers from supplying the balance sheet they did in the old days,” Gregory Whiteley, who manages government debt at Los Angeles-based DoubleLine Capital LP, which oversees about $50 billion, said by telephone June 10.

...

“Liquidity is becoming a serious issue,” Grant Peterkin, a money manager at Lombard Odier, which oversees $48 billion, said in a June 11 telephone interview from Geneva. The worry is that when investors try to exit their positions, “there may be some kind of squeeze.”

As we warned previously, these are phantom markets...

“It’s the sort of thing that rears its ugly head when it is least welcome -- when it’s the greatest problem.”

And is forcing traders into the derivatives markets...

As bond trading has slumped, the notional value of over-the-counter contracts soared fivefold in the past decade to a record $710 trillion, based on the latest data from the Bank for International Settlements compiled by Deutsche Bank AG.

...

Volume on Italian futures, which give buyers the right to purchase the nation’s debt at a future date and price, has soared more than 800 percent since trading of the contracts began in 2009, data compiled by Bloomberg show. By contrast, average daily trading in Italy’s $2.43 trillion market for government bonds, Europe’s largest, has tumbled 57 percent in the past decade, according to the Ministry of Finance.

...

For 10-year note futures, a total of 140.4 million contracts have traded in the first five months of the year, approaching last year’s total of 149.8 million, the most on a year-to-date basis going back to 2007, according to CME Group Inc.

Weekly trading of Treasuries with maturities between seven years and 11 years has fallen to $96.3 billion, a 32 percent drop from a year ago, data compiled by the New York Fed show.

“This is a global phenomenon,” Yvette Klevan

No one knows how badly this will end...

“There is risk that people won’t be prepared,” Richman said by telephone June 9. “The move in yield could be quicker and more dramatic than it has in the past. That’s something we are on the lookout for.”

...

“Investors in Japan assume that the BOJ will continue to buy JGBs vigilantly next year and the year after,” said Makoto Yamashita, the chief Japan rates strategist at Deutsche Securities, a primary dealer. “They take it for granted they can sell those bonds bought expensively to the BOJ as more and more notes disappear from the secondary market. It’s too frightening to think what might happen when the BOJ tapers.”

And with that not only have the central planners broken the largest and historically most liquid markets in the world but have forced investors into leveraged derivatives positions (in order to find liquidity for their exposure-seeking) which themselves are entirely over-promise (relative to the underlyings) and under-collateralized with any quality collateral. As we concluded previously...

Assume tomorrow the real black swan appears and all the liabilities: traditional and shadow, promptly demand collateral delivery. Well, the $11 trillion shortage would mean that risk values of, for example the S&P, would be haircut by a factor of, say, 75%. Or back to the proverbial 400 on the S&P500.

Still think owning real high quality collateral, not of the paper but of the hard asset variety such as gold, is a naive proposition, best reserved for fringe lunatic, tin foil hatters and gold bugs?

Go ahead then: sell yours.

FLOWS - In A Sea Of Money Printing, What Happened To All The Liquidity?

In A Sea Of Money Printing, What Happened To All The Liquidity? 06-13-14 Zero Hedge

Volatility is depressed, micro dominates and as Goldman notes several of the key emerging themes of the last few years have lost their discovery value. There are many questions that investors should be asking as the second half of 2014 approaches (and the much hoped for 'recovery' picks up steam); but perhaps the most important one given the taper is "In a sea of liquidity, what happened to all the liquidity?" The supply of stock and volumes are down. Did you know Verizon’s current market cap is larger than Russia’s float?

Via Goldman Sachs,

Despite the market reaching all-time highs, the backdrop for trading activity remains depressed. US cash equity trading volumes have declined 50% since their Oct-2008 peaks, the VIX is back to sub-12 levels and the total supply of tradable stocks has declined by roughly 25% in the last decade (Exhibit 1). Layered on top of this is the impact of the well-publicized shift to passive investing where turnover is 10X lower than active management (Exhibit 1).

With the market awash in liquidity from central bank easing (and low rates) this frustration remains acute among investors. We note the following:

Outside of the United States, only four countries have more than 50 stocks with over a $10 bn market cap (Japan, the United Kingdom, China and France). The picture is similar when looking at trading volumes; just four countries have over 50 stocks that trade over $20 mn/day, which include Japan, China, the United Kingdom and Canada. See Exhibit 2.

Over two-thirds of the world’s market cap is in the top five markets. In order to reach the market cap of the United States, one would need to sum the next 2-14 countries (including those listed on the Euronext and OMX).

Only three of the countries included in the MSCI Emerging Market index have total market caps that are larger than Apple (the largest stock in the United States). Scorecard: Johnson & Johnson is larger than South Africa, Verizon is larger than Russia and Delta Airlines is larger than Greece. See Exhibit 4 for other comparisons.

And then there's Japan...

FLOWS - Central Banks Draining Equity Liqudity

"Cluster Of Central Banks" Have Secretly Invested $29 Trillion In The Market 06-16-14 Zero Hedge

Another conspiracy "theory" becomes conspiracy "fact" as The FT reports "a cluster of central banking investors has become major players on world equity markets." The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms$29.1tn in market investments, held by 400 public sector institutions in 162 countries, which "could potentially contribute to overheated asset prices." China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world's banks try to diversify themselves and "counters the monopoly power of the dollar."Which leaves us wondering where are the central bank 13Fs?

While most have assumed that this is likely, the recent exuberance in stocks has largely been laid at the foot of another irrational un-economic actor - the corporate buyback machine. However,as The FT reports, what we have speculated as fact for many years now (given the death cross of irrationality, plunging volumes, lack of engagement, and of course dwindling credibility of central planners)... is now fact...

Central banks around the world, including China’s, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions.

“A cluster of central banking investors has become major players on world equity markets,” says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif), a central bank research and advisory group.The trend “could potentially contribute to overheated asset prices”, it warns.

...

The report, seen by the Financial Times, identifies $29.1tn in market investments, including gold, held by 400 public sector institutions in 162 countries.

...

China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, as the report argues is “partly strategic” because it “counters the monopoly power of the dollar” and reflects Beijing’s global financial ambitions.

...

In Europe, the Swiss and Danish central banks are among those investing in equities. The Swiss National Bank has an equity quota of about 15 per cent. Omfif quotes Thomas Jordan, SNB’s chairman, as saying: “We are now invested in large, mid- and small-cap stocks in developed markets worldwide.” The Danish central bank’s equity portfolio was worth about $500m at the end of last year.

Read more here

So there it is... conspiracy fact - Central Banks around the world are buying stocks in increasing size.

To summarize, the global equity market is now one massive Ponzi scheme in which the dumb money are central banks themselves, the same banks who inject the liquidity to begin with.

That would explain this.

That said, good luck with "exiting" the unconventional monetary policy. You'll need it.