How Will the Stock Market Will Die?

In this cycle, the stock market will not die a natural death. In an organic market which is what professionals and amateurs believe we have, a bear market begins when supply slowly overtakes demand. Often when prices have been elevated by investors bidding prices up due to a strong belief in positive influences, a crash occurs when selling accelerates.

Today’s stock market has been created by a political agenda and is not the result of enthusiasm and excitement on the part of the public. As supply begins to overtake demand, stock prices are artificially supported. In order for the market to drop, the political agenda will have to be exposed or the support network must unravel more than it already has. What are the pillars that support the market? How can changes within and between these pillars  cause the stock market to fall?

Federal Reserve: The primary role of the Federal Reserve System is that of elevating asset prices. There is no evidence that the resolve to accomplish that goal has weakened. As Quantitative easing ends, new tools for supporting the market are being rolled out. In the case of a serious decline, our Federal Reserve will announce that they are buying stocks outright to “save the world.” In the history of the world, there has never been a government initiative that has been a benefit to an economy.

Foreign Central Banks: Foreign central banks buy stocks without apologies. Many have loaded up on the riskiest stocks in the history of stock market trading. Anytime the central bank favorites are under pressure, expect foreign central banks to support the prices of what they already own. How long will foreign central banks cooperate with a U.S. political agenda? They will continue until or if citizens in foreign counties discover how much they are being fleeced and force changes. Discontent around the globe is growing but so far there is no focus on the actual causes of difficulties. Failure of foreign central banks to cooperate in elevating asset prices would burden our Federal Reserve with a serious handicap.

Friends of the Federal Reserve: These are high frequency trading firms, individuals and institutions which get advance information and are guaranteed a profit. These are the parties who squeeze short positions, slow down volume when that is needed, create artificial demand in the derivative markets and keep prices moving higher. This group is allowed to break just about any law, if the end result is higher stock prices. Causing a decline is not politically doable. These are not patriots. They will cut and run when and if the profit guarantee disappears. As it is, stock market volume consists almost entirely of very short term trading. If mountains of long term holdings started hitting the market, I am not sure the friends could handle it. They also depend on ordinary traders continuing to use traditional technical analysis dogma for decision making. That is about like offering a neck to a predator but folks can’t break the habit.

Corporate Buybacks: This may be the first pillar to break. Corporate insiders are not fools. The fastest way to get paid the most money in the shortest period of time is to run up the price of the companies stock for any or no reason at all. Corporations will take advantage of the government’s gift as long as they possibly can. Producing and innovating is much slower in generating personal profits. They also know that after loading up their companies with treasury stock with borrowed money, any drop in the stock’s price will be catastrophic. This may be the first pillar to opt out.

Retail Brokerage Firms: Every order received is shared with the high frequency trading firms. Retail brokers benefit every time a customer gets stopped out.

Stupidity: The biggest asset the manipulators have is the stupidity of the American public. This is treated as a constant. That may be a mistake. It only takes 3% of the public thinking to generate a change in a political agenda. Thinking is starting to increase ever so slowly.

Chances are still better that the economy will be completely destroyed before asset prices completely change direction. What is important to know is that this is not an organic market. Government intervention in the stock market began during the Reagan administration in a small way and has continued to each year since. Today all of the world’s resources are focused on keeping asset prices moving higher. A very small percent of the world’s population has an overwhelmingly large part of the world’s political power.
The Swamp My Puppy Dog and I is another timely Curbside Jimmy song.

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Herding as a Choice

Herd animal is a choice except that it is a choice not often recognized. Once a herd animal does not mean always a herd animal. Once a human being makes the discovery and reasons.  “Yes, I am a herd animal. I am being herded.” That person flips to the other side and starts reasoning independently of the herd. That hardly ever happens because herding behavior is so normal is it is never questioned.

Living independently of the herd really is that easy. There is one caveat. The discovery of herding nature must be at a deep enough level to influence behavior. Many things are understood academically but are treated like just another thing to know. Understanding occurs at different levels.

Herd animal is the path of least resistance. Herding surely evolved as a survival tool. Go along to get along and your chances of suffering are greatly reduced. Herding behavior surely facilitates ones genes are passed forward into new generations.

Opting out of the herd is risky and not necessarily the best choice. To engage in the study of economics, leaving the herd is is entirely necessary, if being right is of any genuine importance. Clearly very few academics leave the heard. That is why they sound so smart but are never right about anything.

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Crime is Contagious

Crime is o.k. as for secretaries of states, members of congress, presidents and so on. The probability of being prosecuted diminishes the higher up a person is on the political power scale.  This is nothing new. What is new is that folks know about these kinds of crimes and watches those at the top get away with everything from murder to gun smuggling. Innocent until proven guilty you say? That standard only applies in an actual court of law. For a case to go to trial there must be a suspicion crimes are committed. Sometimes suspicion is well grounded. In the cases of the politically powerful suspicion is explained away.

Crime is in fact contagious. Human beings broadcast and receive their states of mind. Everything people do is at least in a minor way contagious.  This is all outside the awareness of the people who receive and broadcast. Not surprisingly verbal communication is unique in that we are aware of what we are doing. People are influenced in countless ways of which they are completely unaware.

When crime is o.k. in government and with politicians this influences the behavior of ordinary people. Do things in the country seem weird? Some of those already on the edge go over the edge as a result. 

This is not clairvoyance. The communication is wordless. We don’t know what it is but we know it is there. The best way to put a damper on school shootings is to begin to hold folks on the higher end of the power scale accountable. Until laws are enforced at the top, don’t expect to see a let up in lawlessness at the bottom. Expect more school shootings. Expect other odd acts of violence. Expect chaos.

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The School Shooting Solution

I have written many times that solutions to problems are normally simple. Complex solutions evolve because the solutions are distasteful or will upset the prevailing structure of society.

Schools are organized in such a way that a child’s identity, self worth and role in society is determined by how successful he is in interacting with other students. Within high schools a social structure develops. There are kids at the top and kids at the bottom. Then there are kids who are neither at the top or the bottom. They are rejected by everyone. To high school students being accepted is imperative. Failure to be accepted is failing as a person. Some kids can handle it and some can’t.

Schools encourage the social structure. They nurture it. For the majority of students, their worth as a person is all they learn. Neither parents nor teachers want to change this so focus turns to guns. I am not a gun guy. I don’t own any. I have little respect for the one issue conservatives who rant constantly about loosing their second amendment rights. They care nothing about keeping any of their other rights. So, I don’t need them. That being said taking away guns is what gets the attention so that something can be done without addressing true causes.

The way to end the phony high school culture. How would that be done. Shut down the athletic programs. Get rid of school clubs. Take away all of the school spirit. The kids who do these shootings, although their victims are people, they are shooting at the system itself. Make the schools business like. Absolutely nothing goes on besides learning and teaching. The shootings will disappear.

This is a solution. Something like this is not a popular idea. The way it is now, schools jobs are at a maximum. Vendors depend on schools being exactly the way they are now. Parents might have to send kids for only a half day and the babysitting aspect would be lost. The solution is simple so the real cause is set aside and guns are said to be the heart of the problem.

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Donald Trump, World Leaders and Tensions

Any world leader is potentially dangerous. It is important that citizens see them for who and what they are. It is unwittingly assumed that world leaders are actually trying to do what is best for their respective countries. This is what I call the imaginary incentive to serve. Nature provides no such incentive. World leaders acquire their positions out of self interest. Donald Trump, President of the United States is no exception. The game of politics at the top is played by mankind’s most accomplished and effective predictors. All are very effective at manipulating people and circumstances. Truth is not part of politics. Only one thing matters to a world leader. That is getting what they want. Power is always at the top of the list.

The office of President of the United States is generally held by a person who does not live by a particular moral code. Donald Trump pays for sex. Many people would not have a personal friend who does that. Most have also learned that that is what they are going to get in a president. It is hard to turn someone out of office for such a thing and there would be no point. The replacement would likely be just as bad in that department. To become a world leader, one must have an elevated notion of entitlement. The fact that Trump has questionable  morals is so commonplace among politicians, there is not much point in worrying with it.

If you are a citizen and support Trump, you may come out ahead. The things Trump does my be of help to you but that is incidental. Trump’s concern is Donald Trump. That is the nature of elected leaders. The incentive to serve really is completely imaginary. As silly as it is, citizens get the short end of the stick over and over again because they honestly do believe their leaders take them seriously. That is not the case.

Lets be clear. We do not know what Trump wants or what he expects to gain from holding the office. There are parts of the process by which he gains power that are potentially dangerous. I write constantly about the propensity of mankind to worship. Who worships who? Who needs whose approval? Donald Trump is an absolute master at getting folks to need his approval. When he was doing his show, The Apprentice he had people standing in line to get fired by Donald Trump. He and his family are heavy into branding. What is branding other than manipulating others into believing something is special just because it is endorsed by a special person. Branding is the business of selling products to people who need the approval of the person whose name is on the brand.

The danger we have in Trump is that he has an extraordinary ability to get people to act without thinking by virtue of needing his approval. What is politics? Politics is the art of getting people to act without thinking. So far Donald Trump does not seem to be guilty of anything with which he is being accused. He is called a racist constantly but he is not. He can get people to do things which are against their best interest. World leaders are all potentially dangerous. An individual who can coax others into worshiping him, or needing his approval if you prefer, can get folks killed and seriously impoverished if he takes a wrong turn. The most destructive leaders in history all have had this same characteristic.

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The Great Unraveling

Q.E. is over so now it is time for the stock market to fall? It doesn’t actually work that way. Quantitative easing would not be discontinued if there was not another plan for elevating stock prices being implanted at the same time. That is a complete certainty. Americans and other ostensibly free populations are not gong to figure this out soon enough to do them any good. At this point, the hurdle for overcoming instinctive behavior as it applies to economics is just to high.

Trusting government, believing in collective decisions and assuming government is benevolent are all instinctive behaviors. Hardly a soul on earth will believe that the Federal Reserve is not actually focused on improving the economy.  Even the members of the Open Market Committee have probably convinced themselves they are performing a public service. The fact is though, that all of the governments in the world are focused on moving asset prices higher and supporting the lifestyles of their richest citizens. This is where all energy and most resources are focused. In the United States government is used only as a tool for rigging markets, managing public opinion and transferring wealth.

There are circumstances where average folks do get benefits from government but other than the rich, there is no group that gains a net benefit. It is easy enough to point to a welfare mother and claim the poor get benefits. There is no net benefit. Government programs for the poor, serve a few of the poor but render most worse off. The minimum wage is the best example. Fantasy says raise the minimum wage and all of the poor benefit. What actually happens is the minimum wage prevents the labor market from ever clearing. The average starting wage would actually be higher if there was no minimum.

There is no conspiracy. It has taken years of abuse for our system to morph into what it is now. Federal Reserve policy has never been anything other than a political agenda. That is what it is today. The political system is unraveling. Even so, the political agenda, as informal as it may be, says elevate stock prices and support the rich. It will take more unraveling before the central banks abandon all heroic efforts to save and turn the stock market. There is a new plan in effect now but the asset enhancement initiative is not over yet. I am not saying it will work for ever or work at all. But, there is no way the group that has turned the United States government into an endless well of effervescing profits from the financial markets is going to figure the gig is up and just walk away.

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Stock Market No Man’s Land

The average analyst is still tirelessly looking at as it is some kind of organic bubble. I am telling you traditional indicators have never looked worse. Ask me if I care?

Nothing you can reduce to a number or look at on a chart makes one iota of difference. All that matters it the degree to which the political arena changes. It is changing but ever increasing asset prices is history’s biggest cash cow. Never have so few made so much by fleecing so many. This cash cow will not be abandoned as long as there is the remotest chance of keeping it going.

Here is what matters. Central banks have to give assurance that participants in corporate buybacks will make a profit. This is a very hard sell but so far they are doing it. The public has to remain completely in the dark as to how much they are being fleeced. The traders who are still active must continue to take short positions every time traditional indicators tell them the market is about to collapse. Accounting laws must continue to be not enforced. The media must continue to coordinate reporting with the wishes of the financial sector. After all of this central banks will have to be forced to quit buying outright.

As an investor, using in traditional tools of analysis amounts to and animal offering his neck to a predictor.

This is not a bubble. It is a mature political agenda. It won’t stop until events or circumstances cause the political structure to fall apart.

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Slavery Today

First man learned how to capture and make use of animals. Animals were herded, eaten and used as labor. From there humans from other tribes and societies were captured and made into slaves. At one time slavery was very popular. The first real economic systems were fuedalism and then mercantilism.  Under these systems genuine freedom was rare. Everyone except the king was a servant of someone else in some capacity. When wars were fought, the entire country which lost would be force to serve the people of the country which won. Prisoners of war became chattel and served as slaves.

In early times the institution of slavery was highly profitable. While private parties could own slaves, people were normally enslaved by governments and ended up as property of upper class citizens who had political power. Then the world changed. The free market concept evolved and paying wages became more economical than owning people and bearing the enormous expense of keeping them. Free labor turned out to be much more efficient and productive. Free labor became the standard. The problem of slavery began disappearing not rapidly but disappearing just the same. When the War Between the States broke out, interest in owning slaves in the North was gone because free labor proved to be less costly for manufacturing.  Had slavery been profitable in the North, there would have been no Civil War and slavery would have still been legal in those states. Slavery was becoming less profitable in the South, just not fast enough.

Chattel slavery is no longer legal in the United States. Servitude is completely normal and more than commonplace. In modern societies servitude is still managed withing the world’s system of dominance and subservience. Even though Americans are not forced into lives of slavery they are more than pleased to offer their freedom to others in return for comfort and security. Society is organized in ways that make servitude the path of least resistance.

Chattel slavery in the United States is an extinct form of labor management. Still, servitude as an institution continues to flourish. Is servitude a choice? In the South during the Civil War, it was common for slaves to openly choose to stay with a master. Servitude can be a choice and is when there are more benefits that way than being free. The human brain is concerned with survival and reproduction and attends to those goals first.

When congress hordes information so citizens cannot govern themselves it is really, facilitating the institution of servitude. Since representation is transferable, lawmakers serve citizens who offer them the most benefits in return. It is constantly noted that the income distribution in the United States is becoming very skewed in favor of the upper class. Over time Americans have opted for lives of servitude and the rich and powerful are aggressively taking them up on the offer.

 

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Knowing What is Not True

I thank everyone who reads and visits Fantasy Free Economics. Word to mouth and some sharing now and then has been the only source of readers. Search engines do not send traffic to a site unless it is to their benefit. There is nothing on Fantasy Free Economics Google and others would like for people to know. Search engines are in the business of herding you. I am trying to teach you how not to be herded. Fantasy Free Economics is not their friend. There is nothing to sell here not that here would be anything wrong with that. The truth is hard to sell. There is no market for it at all. That is more the reason for “nothing for sale.”  than any lack of interest I have in making a profit. Truth does not sell. To make a profit here, I would have to venture away from being truthful. Then there would be no reason for folk to read what I write.

I really should not use the term “telling the truth.” What I do at Fantasy Free Economics is expose what is not true. As one false belief is exposed, then another and then another  we get closer to the truth. It is almost impossible to establish anything as being permanently true. It is surprising how many “certain” truths from days passed turned out to not be true. Newtonian physics was deemed “all there is to physics” for the longest time. Then someone discovers quantum mechanics. How many times in your life has coffee been explained to be bad for a person and then said to be a good herb to drink? It is not that truth is relative. It is that we have limitations.

The key is to constantly discover beliefs that are not true. Doing that we get closer and closer to truth as time passes. (not that we know what time is) What I talk about at Fantasy Free Economics are false beliefs that are largely accepted as true but that are actually nothing close. Where economics and politics are concerned most beliefs on which the disciplines are based are simply not true. In many cases this is because thinking about existence in its rawest form is so stressful, more pleasant ways of looking at things evolve as replacement. There are ideas in economics that are true. The most widely accepted beliefs are simply not true. That makes it almost impossible for an economist whose reasoning is based on traditional dogma to be right about anything except by accident. The study of economics treats individuals as sentient beings and autonomous decision makers. It turns out that humans are guided by instinct more than anything else. Sometimes knowing what is not true is more important to know than at others. This is not a particularly good time to settle for group think and be done with it. There have been periods in history when a person could live a whole life believing reality was one way when it was actually another without experiencing personal harm. That is not the situation today.

A new Curbside Jimmy tune: The scene shifts from a regular swamp to the big swamp in Washington D.C.

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How the United States Will Lose the Next War

It is not a foregone conclusion that a major war is in our near future. If we fight the war we seem to be starting, we will lose. That is not a wish. That is just the way it will turn out. The American people have nothing to gain. The average person has no use for or interest in forming a world government. Based on military strength, no country in the world is a match for the United States. Absolute military power is not enough to win a war. Wars can be won and nothing can be gained. We have been fighting those kinds of wars for a long time. That was the nature of the Iraq and Afghanistan wars.

There is a story about the fastest rabbit in the world and the best rabbit hunting dog having an encounter. All bets were on the dog. He had never failed to catch a rabbit he was chasing. When it was over, the dog was asked why the rabbit got away. The dog said, “We have to be realistic. I was hunting for sport. The rabbit was running for his life.”  The American people have nothing to gain by going to war at this particular time in history.  Any resolve on the part of the general population will disappear rapidly. The danger Americans face is the probability their government will put them in harms way for no good reasons. The morale of our troops will diminish.

Our intelligence community is bought and paid for by interests other than the American people. Chances are our intelligence is not as good as it is assumed to be. How good will their intelligence be? We don’t know. Our intelligence agencies are so corrupt, there is no way to tell the veracity of anything they tell us.

Russia and China have far more to lose than we do. They will not fight us on our terms. They will seek out advantages and situations where technology is not that important. For certain all who our leaders treat as enemies are putting a lot of thought into the situation. There is no guarantee, there won’t be a strike on our own soil. Probably the other side will draw us into a ground war where the mere size of armies makes the most difference. During WWII Russia took unfathomable casualties and still prevailed against Germany. They will draw us into situations where U.S. casualties will be certain. If the war takes place, we will lose.

The world will fight against the United States in a way the world fought against Germany in the 1940s. I remember watching a news show while we were invading Iraq in 2003. Someone mentioned civilian casualties. One of the guests said “Citizens are responsible for what their government does.” This was a panel discussion.  Not one person on the panel took exception to that statement. I wonder how a panel of news people will respond to statements like that when it is American civilians getting killed?

 

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