Categories
Economics Investing Politics

The Age of Irrational Exuberance – Equity Markets in a Time of Chaos

First – let’s get the facts out of the way:

Fact 1: Share prices keep climbing and indexes keep hitting new all time highs

Fact 2: Past results do not guarantee future returns

Fact 3: If the price of something rises but the underlying value doesn’t increase, then the unit of monetary measure has actually decreased in value

Fact 4: As the value of the monetary measure decreases, the price of everything will rise (inflation)

Fact 5: Price and value will balance against monetary measure unless markets or currency are being manipulated with hidden actions

And now let’s get the bullshit out of the way:

BS 1: Trade wars benefit economies overe the long term

BS 2: Free markets need regulation

BS 3: Interest is ‘free’ money

BS 4: Fractional reserve creates ‘new’ money

BS 5: Equity markets can keep moving upwards indefinitely

Whew. Now that we’ve got all that out of the way, I’d simply like to point out that there is some serious bullshit going on with the United States equity markets and economy right now. Example one would be the SEC announcing after the close of trading on Friday that they were suing Elon Musk and Tesla – and then Tesla, Elon Musk, and the SEC agreeing on a settlement before the open of trading on Monday morning. This is some BULLSHIT – here’s why: the net result of all of this was to create an astounding arbitrage opportunity for massive institutional money that shifted profits from main street investors into institutional coffers. Mom and Pop investors had no opportunity to take part in this armed robbery – only to be the victims of the entire fiasco. Example 2: the fake news and FUD around the Canadian NAFTA deal and once again – the making of an announcement during closed markets which allowed insiders to profit and outsiders to lose.

Here’s what I’m getting at. The current US administration is manipulating the markets on a scale never seen before to generate massive profits for insiders. The timing of tweets, deal announcements, controversies – all of this has been carefully orchestrated to create the biggest ripoff in world history. Every day there is more evidence that this administration is robbing Peter and Paul to pay Donald and friends. Here’s what is happening: they are playing a penny slot machine and making the public into the punters who keep feeding dollars into it. Penny slots work like this – if you bet a penny, you might win 50% of the time. If you bet ten pennies your odds of winning go up to 75% of the time but the losses are heavier when you lose – so you win a penny, win a penny, lose four pennies, win a penny…and the net result is that you have won three out of four pulls of the handle but you actually lost a penny out of the deal – but you don’t notice because you still have pennies to lose – so you are winning, winning, winning – but suddenly you are out of money but as a ‘winner’ you know that you can make it back so you put more in (more on= moron) and the cycle continues until you have to go find a better job.

That is what is happening with US monetary policy, trade deals, the US equity market, and more. Is it a coincidence that Donald Trump is a casino owner? He knows that the reason the casinos are filled with penny slots is because penny slots are where the most money gets made. He and his buddies are bleeding all of us dry. You, the one reading this, might think he is on your team – but unless you are a corrupt billionaire oligarch – he isn’t on your team – he sees you as his mark. Ask the people of Atlantic City what he did to them? Here’s a great article about that:

9 Ways Donald Trump Might Have Ruined Atlantic City

It’s actually mindblowing how stupid we (collectively) are. Everything he has done and continues to do makes perfect sense if you look at him as what he is – a guy who is out to make money for himself and his friends – and his friends are only valuable to him as long as he sees a way to make a buck off of them. Like no other President before him, he has used and continues to use his presidential powers to make money and to create profit. He has spread out like a virus in the various departments and agencies of the United States government – while we watch distractions about immigration he filled the courts with his people. While we watch trade wars he reduced the tax burdens of his billionaire class. While we stare at election results and confirmation hearings, he takes control of the tiny capillary branches of government that make larger seats of power irrelevent. This is death by a million paper cuts.

The markets go up and up and up. Your 401k is worth more than ever. Except it’s not. Inflation is rampant and being hidden. You’ve noticed that your dollar buys less, but you don’t want to think about it. It buys a lot less but you don’t want to think about it. Those markets are going to keep rising and your dollar will keep going down…win a penny, win a penny, win a penny….and where did your money go? But it’s not that bad…it’s okay…things are prosperous and you just got a raise…and everything is so cheap on Amazon…a smart microwave for only $69!

The thing is…that microwave isn’t $69. It’s more like $1000 in labor, costs, material, shipping, the technology cost, the cost of running the companies that make it…so where is the other $931? That’s a good question and it’s one we might ask of the economy as well. Where is all this money in the markets coming from? How is it possible that the markets keep going up and up and up?

Nearly ninety years ago, prominent economist Irving Fisher exclaimed joyfully that the stock market had reached a new permanent plateau – at the time – Americans had taken on more debt than ever before to enjoy the benefits of nearly a decade of a booming economy. The same conditions were in place a decade ago before the 2008 financial collapse. They also exist now. Fisher and the talking economic heads we see today…all of them exuberant about the rising tide of success and winning. Win a penny, win a penny….

“After witnessing nearly a decade of growth, most economists, investors, and captains of industry believed that the market’s natural direction was up. The beginning of the crash struck them not as a sign of financial doom, but as an opportunity for bargains.” – http://time.com/3207128/stock-market-high-1929/

And then, on October 24, 1929 – the unthinkable happened. The markets went down and people bought. They went further down and people bought more. They crashed and people bought more and then they went into panic. Suicide, bank runs, inflation, madness.

So, all of that is something to think about. Now, where does that extra cost of the microwave come from? It comes from all the debt you and I are carrying. Americans are more indebted than EVER before. Our credit scores are higher than ever before and the amount of debt we carry is higher. The stock markets are higher than ever before. The markets are creating the illusion of complete chaos – but never before has there been as much insider regulation, insider knowledge, and orchestrated heists – this is the most controlled market in the history of the American stock markets. While it gives the illusion of chaos – it’s no more chaotic than the penny slot machines that generate billions of dollars in revenue for casinos. There is nothing random or chaotic about it. It’s a scam and if you believe the marquis in front of the casino that declares “Double Your Paycheck” then I’ve got a stock I’d love to sell you…

(full disclosure: I’m investing in this market just like everyone else…I love slot machines even if I recognize they are rigged against me)

Categories
America Economics

A Shameful Society

What kind of world do we live in when a slime ball like Bill O’Reilly not only doesn’t get fired for sexual harassment but also gets a huge payoff when the company he works for (FOX) realizes that people are upset that he got away with sexually harassing multiple women – who were also paid off by Fox to keep them from pursuing charges? Certainly I’m no fan of the politics of Fox news, but this takes the cake – essentially, O’Reilly just got a huge payoff for being a dirtbag – it’s almost as bad as electing a man accused of sexually assaulting an underage girl to the office of the President – which, come to think of it, actually happened and so this shouldn’t be a surprise at all. Decency does not matter any more in the United States – only money.As long as existing home sales rise (they have), marketshare, and the Dow Jones Industrial Average rises – all is forgiven.

I have spent a fair amount of time trying to figure out what is propping up our economy and I’ve failed to discover anything – which is not a surprise – no one seems to have the answers as to why the economy in general should be rising but the fundamentals of the economy remain gloomy. I’ve got a few guesses 1) there is a lot more US Currency being printed than we are being told – the economy is still being fluffed 2) student debt is somehow being packaged and resold despite an average default of once every minute 3) capital doesn’t have a safehaven or a strong negative bet and is bouncing around while it waits for a shoe to drop.

As a retailer, I know one thing for sure, people are not spending recklessly on material goods. I don’t know where their money is going – but they are being tight with it when it comes to spending in brick and mortar shops. My suspicion is they are spending credit on online retail, spending cash on food and experiences like travel, and investing equity in their properties which they use for AirBnB rentals – which drives the cost of rent up and the cost of buying a property up as well.

And all of that leaves the great majority of us – scratching our heads and wondering where all the prosperity we were promised as kids has disappeared to. And the answer is, it doesn’t matter. Go buy a lottery ticket or do some serious sexual harassment because that is the surest path to riches in the USA of today.