Major indexes have the October jobs report behind them and the market bulls will now focus on marking up prices until the year end. Little has been able to side track the recovery from the Oct 16th lows where suddenly a curious black hole appeared and sucked up all the volatility of any price movement. This vanishing volatility clearly indicates the markets ultimately fear no downside and that every stock and any paper representing a sector of equities is protected by the belief in the Fed's ability to guarantee up. For its part, the Fed is eager to spin the dove whenever it feels necessary since the only world metric for zero rates is the price of equities.
The Fed's message is one of accommodation and the resulting mechanics are transactional trade offs where chasing returns, stock buy backs, and finally, the belief in upside invincibility have produced a flood of additional ETFs and the soon to be delivered ETMFs. While the ease of transactional variety is pleasing to investors of all sizes, the motivation is a race for market share among ETFs while creating pseudo primary market products which have serious secondary market implications. These creations are much like all financial engineering vehicles of the past where good paper becomes bad paper when the mechanics behind pricing fails and liquidation creates panic.
