That is, as a shift in psychology has already occurred with respect to undertaking debt/credit expansion — i.e. readily accessible liquidity is being used to shore-up balance sheets, to the degree possible; thus, any such measures to encourage risk-taking, are likely to have difficulty in overcoming this hurdle.

The significant shift that has occurred recently is the Fed, and by inference, other central banks, willingness to increasingly risk the viability of their respective balance sheets in order to influence a shift in risk preferences. A new broad-based asset bubble is unlikely as any ‘pullback’ in asset trajectories that such a central bank move attempts to create will almost certainly be met by asset liquidation, i.e. it’s akin to being long a position well below the entry price — it’s a natural reaction to let ride any rallies as long as possible, but to reduce risk, when it appears any such rallies have run their course. This is the result of the shift in psychology.

So, overall, any initially positive equity-related reactions are likely to resolve in further downside, until such time a broad-based capitulation has occurred.”