Tag Archives: Economics Depression Stock Market Crash

Where Stupidity Rules

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As Americans go about their daily lives as individuals, many are brilliant and completely adept at what they do. When they participate in groups or aggregations of people, all but a few are completely stupid.

Notice the discourse in the political arena. Do you hear are read anyone making well reasoned intellectual arguments as to why one way is better than another? How often are attempts made to get you to change your mind or adopt an idea without thinking? Look and read, you won’t find an exception. Politics is the art of getting folks to act according to another wishes without thinking. Continue reading →

Taking the Stock Market Private

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So the stock market gets organized support. Is the news bad? If it is the market gets extra support. Is the news good? Then the market get just enough support. I have written a lot to the effect that there are advantages to centralizing and concentrating stock ownership into strong cooperative hands. Each day that goes by, corporate buybacks and central bank purchases take trade-able stock out of circulation. With every passing day, the task of elevating stock prices gets easier. There is less supply so moving stocks higher gets easier and easier. What is the end game here?

The stock market is being taken private. Don’t misunderstand. Ordinary people still own stock and quite a lot as a group. The plan is for the elite of the world to own a controlling interest in all of the world’s major corporations. That is not as hard to do as it first sounds. Free money from the government is limitless. What we are witnessing is the wealthiest segment of the world finding ways to own or control the factors of production globally. Wars for profit control land. The media as an opinion management service controls the reasoning of the general population. That leaves the capital markets of which the stock market is the most significant part.

The important point I am going to make is that there is no point at which manipulation of the stock market will be discontinued. That is because there is more to the stock market agenda than just churning out profits in the immediate time frame. Profits are a big deal but the goal of privatizing the stock market is bigger than that.

No one who understands markets or economics seriously believes it is reasonable to expect rising asset prices to generate aggregate demand indefinitely. In terms of independent and dependent variables, economic activity is the independent variable. Asset prices are the independent variable. These kinds of variables are not like wild cards in a poker game. Demand driven by increased asset prices is a reversal of the dependent and independent variable relationship. So, that process has a lifespan. No smart person believes this is a permanent situation.

The goal of privatizing the stock market is separate and independent from efforts make trading profits or using the wealth effect to generate temporary GDP numbers. The goal is to concentrate and centralize stock ownership. That effort will not be abandoned willingly.
The truth is a hard sell. Fantasy Free Economics gains readers one at a time. Major search engines simply do not list blogs which disagree with their political agenda. As long as folks share the link to this blog and others speaking out against the grain, the truth will at least trickle into the public consciousness.

Fantasy Free Economics recommends the following blogs.

Of Two Minds Liberty Blitzkrieg Mises Institute Straight Line Logic Paul Craig Roberts

Understanding Monetary Policy

Because economists as a rule believe in the imaginary incentive to serve, they work on the basis that Federal Reserve Open Market Committee members are selflessly doing all they can to do what is right for the economy. Because the Federal Reserve is defined as being unbiased and independent, they act on the basis it is.

These notions are fantasy. Monetary policy always comes down to just a few incentives. The members cannot ignore the political agenda of the people who have appointed them. The political agenda always comes down to enhancing the economic lives of all who support and keep politicians in power. This accounts for their total devotion to elevating asset prices and forcing profit margin higher over the past several decades.

The most important factor though is how each individual member of the committee appears others who are observing them. Appearing to doing the right thing is of utmost importance. Saving face as a motivation is absolutely imperative. There is nothing the Federal Open Market Committee members will not do to escape blame.

There will be many statistics cited. Philosophies will be explained. Mountains of mush will be thrown out for everyone to read an listen to. None of that makes any difference. Nothing will matter other than what actions make them look the best.

They are working against the clock. Why do certain economic numbers look good? Because asset prices have been elevated and that translates into consumer demand at the highest income levels. The poor and middle class have been devastated financially during the long term asset enhancement initiative. They have nothing to spend.

When the stock market finally crashes, the driving force behind the recovery will evaporate and work in reverse. Not only will wealth be destroyed in terms of assets. No other consumer demand will emerge fast enough to keep the bottom from falling out of the overall economy.

Every ounce of energy possessed by the combined staff of the Federal Reserve will be focused on finding a way to blame the coming economic disaster on something other than what they have been doing.

Can Traders Adapt?

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The bison is near extinct as a species because a new predator moved into its living space. The bison herds had no way to adapt fast enough to avoid near extinction.
Ordinary securities traders are, as a result of high frequency traders, in the same shape the bison herds were in when the white man started killing them off. I am including hedge funds and anyone else who trades and doesn’t hold securities long term.
High frequency traders may or may not be profitable themselves but cause losses to others by distorting the market in ways that have nothing to do with supply and demand.
High frequency traders have several advantages in their operations. Firstly they are above the law in every sense of the word. They do not have to obey laws that regular traders are subject to. Their persuasive powers are enormous. They have the vast majority believing their activities are innocuous and no effect on securities prices.
Traders could adapt and the high frequency would have no advantage at all. So, why do traders fail to adapt? Mostly, they are stupid. The time honored sacrament of placing stops is a guarantee of losing money, especially where short sales are concerned. A trader is short, so he covers immediately when the short goes against him. Good money management you say? High frequency trading algorithms game the time honored technical analysis dogma. There is no money to be made trading this way in the current area.
The answer for the individual is to lengthen the time frame he trades in, and to trade without stops. It is generally considered un-trader like to holler foul. Never mind the stigma of being called a wimp. Besides, nothing needs to be said.
One time a professional poker player said, he just doesn’t play in a game if the thinks someone is cheating. He finds another game. He knows there is no way to win if other player can manipulate the outcome of the game. Change games by working in a different time frame and lose the now outdated technical analysis dogma.
I am short a portfolio of stocks because I think a big play is coming to the downside. I could be wrong and if I am I will get the loss I deserve. But, I do have a chance to make a profit as does a bull who takes the opposite side. There is no point in using an approach that makes gains impossible by virtue of serving a food for a predator.

The Stock Market Is Cooked

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I just want to remind everyone that despite a few days of higher stock prices, the stock market is cooked as is the U.S. Economy. This cannot be prevented. The pillars of free enterprise have been removed and replaced by central planning. Great suffering is to follow. Look after yourself and your family as best you can. We are entering a serious period of its every man for himself.

Stock Market Crash To Continue

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Before the U.S. financial markets open tomorrow morning it is important to remember that all assets, especially stocks are on borrowed time with respect to value. Governments around the globe have spent the last two decades conducting monetary and fiscal policy in ways that increase asset prices. In a free market, asset prices are determined independently of government interference. Since the goal of every government in the world is to increase the wealth of the class which keeps it in power, all sorts of lawlessness and price manipulation has been ignored by regulatory authorities, as long as the result has been higher prices.
There is not one honest market in the world today. The U.S. capital markets have been destroyed. There is far more money looking for investments, than there is productive areas to place the money. Businesses in the United States cannot generate adequate profits necessary for the government to collect enough in taxes to operate and pay interest on debt.
The thinking of Americans is still backwards, in that central economic planning has brought us to this disastrous juncture and what do you suppose is being suggested as a solution? More central planning is being asked for by the public and more central planning is being offered by lawmakers and the president.
I cannot tell you exactly how the future is going to unfold, only that in terms of economics it will be very bleak. With so many thinking errors driving policy and everyday decision making, there are too many possible negative outcomes. My advice to everyone is to be forewarned and look out for yourself.
I cannot say when, but the bottom is going to drop from beneath the economy and the stock market. Should the stock market rally some this week, don’t be fooled. A portfolio of short sales is the only strategy that will possibly generate a positive return for the foreseeable future.
Remember, holding short positions is the opposite of owning assets.

I can’t stand it. I mean when college students can’t get jobs because their degrees have no market value. Watch this video. You’ll love it.

Economic Depressions Follow A Pattern

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Economic depressions follow a pattern. Typically the beginning is characterized by stubborn adherence to a number of erroneous beliefs that have made the economic downturn inevitable. Today there is still an almost universal belief that government can create jobs and stimulate the economy with government spending. Until there is a consensus that government can’t do these things, the end is not in sight.