The Fed Unwinding

Back in August I told everyone what to expect out of the long anticipated fall stock market weakness.

http://quillian.net/blog/the-fall-stock-market-crash/ (for review)

Everything I predicted has happened. I am not that good of a short term trader. The fact that it is all unfolding exactly as I said it would is confirmation that the stock market is being purposefully managed. Lets call it intelligent design. I am not looking at numbers. This is all about understanding human behavior and focusing on incentives.

August was full of negative research reports warning of a coming crash. Lately even Goldman Sachs has been making bearish predictions. The only reasons for bearish reports is to draw in short sellers. Shorts on the books are an indispensable ingredient for maintaining an uptrend.

Here is what to expect for the foreseeable future. The Federal Reserve is unwinding its balance sheet. That means stocks will fall, right? No! The total balance sheet will shrink.  As the unwinding takes place stocks will be purchased as bonds are sold. It won’t be dollar for dollar. If there are not enough shorts to squeeze and the public quits buying, the Fed will buy enough to try and manage a controlled correction.

You will read this same thing other places and you may already have. People absolutely know the financial markets are seriously manipulated but they still trade as if normal market influences are in control. Even huge hedge funds and professionals say one thing and trade according to ancient dogma that applies to free markets. This makes it very easy to manipulate prices. Markets do not change directions with huge and sudden shifts in supply coming on the market. Markets generally top out when supply barely exceeds demand. Momentum takes a while to build. To keep an uptrend in tact it is only necessary to absorb a small number of shares. If enough short positions are on the books, no supply need be accumulated at all.

Again, don’t expect a market crash any time soon. All of the world’s central banks are in cooperation. Friends of the Fed are always available to carry their water and will be as long as the Fed can guarantee their profits.

The Federal Reserve is an integrity free institution. Understand that while many at the top are being richly rewarded, the economy is being destroyed from the bottom up. Chances are that the market will continue to be stable until serious damage to corporate profits can no longer be hidden or explained away.

 

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Socialist or Fascist Your Choice

Fantasy Free Economics provides one sentence explanations. Socialism is using government to take from others by begging. Fascism is using government to take from others by belligerence. Understand that both systems use force to control the population. Individuals who identify with socialism are begging government to sustain them. Those who identify with fascism use the belligerence of government to rig markets and guarantee a positive outcome to their efforts in business or employment.

Today all Americans use one of these two systems to get what they want. Talk to an American and you are either talking to a little Stalin or a little Hitler.

As an animal, mankind lives in the same system of dominance and subservience as other animals. Self interest is the only universal incentive nature provides. Predators, to facilitate survival, first try to live off the efforts of others. They hunt or work only when there are no other options.

Human beings look first to government to sustain them. When that option is not available they are truly industrious.

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We Are All Liberals Now

Left wing socialists and right wing socialists work day and to get what they want out of government which comes down to living off the efforts of others. Conservative is only a noise right wing socialists make. Profess constantly to be a small government conservative while protecting the benefits you receive from government and trying to get more. That is what passes for conservative today.

Notice that there are no free market medicine bills being proposed. Conservatives are not asking for free market medicine? That is not a paradox at all. People are what they do. What they say makes no difference at all. There is no interest in free market medicine. There is no interest in free markets in any other capacity.

The Full Employment Act of 1978 mandates central economic planning by Congress, the Executive Branch and the Federal Reserve. Ask a conservative, do you believe in central economic planning? The conservative will say something like. Heck no, what do you think I am a liberal? No one in congress wants to repeal this act. Constituents have no interest in getting it repealed. There are no conservatives. Is anyone interested in repealing the Federal Reserve Act of 1914. There is no interest there either.

There are differences between right and left wing socialists.

Left wing socialists beg. Begging used to work. Now begging is not that productive.

Right wing socialists use belligerence.  From war for profit to using the Federal Reserve to steal the interest on Granny’s savings to give it to Goldman Sachs, it is belligerence.

Democrats have largely given up on begging. It gets them nowhere. Most Democrats still claim to be liberals but are are now right wing socialists and have adopted belligerence as the tool of choice.

Do not expect Donald Trump or any president to reduce the size of government. Power is acquired and maintained by spending. There are no conservatives so don’t expect smaller government.

 

 

 

 

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North Korea, Will We Take The Bait?

For a number of years, I have known that the CIA, FBI and United States intelligence is not good for much of anything beyond providing high paying jobs to the people who work in the agencies.

North Korea is trying to bait the United States into attacking them. There is more going on here than just a crazy kid with too much power. I do not know who the other players are here but North Korea is not alone. Americans misunderstand how our military is viewed in other places around the globe. The notion here is that we are the good guys in white hats doing good around the world and that we are largely appreciated.

This viewpoint is completely unique to the imaginations of American citizens. For a long time, I have conjectured that there is a consortium of opposing interests which is looking for a way to engage the United States in a mindless ground war. Nuclear war is a possibility but the goal is to put the U.S. in a war where casualties are unavoidable so as to force American citizens to take an interest in the wars the military fights.

The United States probably could not be defeated on the battle field but the citizens can be put in a position where they would likely oppose the government. Deaths of foreigners in their own country’s at the hands of our military is not of concern to American citizens. American citizens only appreciate their own pain and suffering to the degree they have any.

So, it makes since to foreign nations to put Americans in a position where they can’t avoid knowing what is going on. This is what the tension in North Korea is all about. Don’t count on American intelligence for guidance. They don’t have the insight for such a thing.

 

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The Fall Stock Market Crash

September through October is crash season for the stock market just like July through early autumn is hurricane season. Some years there are no hurricanes. In all but a few years there is no Stock Market crash. Generally there is a little market weakness in the fall but nothing dramatic.

The stock market is way overvalued. Few dispute that. The economy is falling apart right before our eyes. So, doesn’t it make sense that the market would crash in the fall? It makes so much sense that big money is hedged up to its eyeballs. It makes perfect sense except that stock prices are being aggressively managed. Despite years of organized intervention in the stock market, all but a few still subscribe to the dogma relevant to a market that is governed buy supply and demand.

Plans are in force to prevent any serious fall weakness. Traders are lined up on the starting line just waiting for the starting gun to go off. This mind set is easily exploited. I am keeping my powder dry and staying in cash. Having cash on hand when the eventual collapse comes is much more important to me than trying to make a killing on one or two disastrous days.

There will be no limits on resources devoted to supporting the market this fall. So, I am not shorting.

Don’t forget that central banks are being used to consolidate and control the factors of production of the major economies of the world. Their buying will be without limit any time markets are in serious stress. Part of this is driven by political agendas. Don’t forget that central banks will buy to protect their existing equity portfolios.

When will stock prices drop? Probably it will not happen until the economy and political system are damaged beyond repair. That exact moment is not knowable.

 

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Understanding QE and Economic Stimulus

Government intervention in the economy boils down to stealing the interest on granny’s savings and giving it to Goldman Sachs. That is the essence of Federal Reserve Policy in this century.

Soon the world’s central banks will start aggressively buying stocks with no apologies. Some already are. Stimulus is never anything other than shifting the impact of economic trouble away from the politically powerful and putting the burden on the rest of the country.

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Tear Down The Statues!

Take all of the statues in the world dump them in the ocean and I won’t care a bit.  Icons have no place in the reasoning process. Get rid of them all and a few folks will feel better and others will experience sadness. Personally I have serious things to think about, like what our military is doing today.

How much sense does it make to tear down a statue of Robert E. Lee for being on the wrong side of slavery while today’s military is killing countless people and has killed millions of people in the Mid East all for corporate profits?

So, you are ashamed of the Confederacy for trying to preserve slavery. But, it doesn’t bother you in the slightest, that our military is currently doing more immoral things than the south ever did.  Total Mid East Casualties are somewhere in excess of 1,200,000. With all of these casualties not one person has been set free and not one functioning democracy has been established. That number is greater than what the United States has suffered in all of its wars put together.

1,200,000 plus have been killed so that the United States can control the natural resources in that part of the world.

It strikes me as a little odd that there is such a large movement devoted to tearing down remembrances of early Americans who are perceived to have been on the wrong side of an issue when our current military operations are far more immoral than anything our ancestors ever participated in.

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It Is All About Animals

There is a short cut to being right about economic issues. Stop studying human beings as if they were an anointed species just a step below divinity. Do this and you will begin to understand all of what is going on in the world.

The next step is to accept total uncertainty as reality. Then watch the animals as they go about replacing that reality with euphemisms and fantasies. No one knows what life is. No one knows what death is either. All animals survive by consuming living things. The animals which do the best are the ones who do the most killing. The most prolific beasts at consuming living things and killing are human beings. Humanity is such an efficient killer that  killing is done by a small number of human animals. But, the numbers are there.

Accept  these things and it becomes clear that self interest is the universal incentive. There are no other incentive in play with respect to government. Why do politicians run? They run to get what they want and that is usually power and money. That is why you end up with no representation. After casting a vote, you are of no use to those you elect. The representation you feel entitled to goes to others who are more useful to the office holder.

These are the cold hard facts. Just know that if you expect government to provide more certainty in your life, you are harming yourself and making yourself available to be a sucker. Certainty does not exist. What does not exist cannot be provided. Watch human activity just as if you were watching an aggregation of other animals and it is no trouble at all figuring out what is going on and even what is going to happen next.

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The End of Keynesian Economics, Hopefully

A an economist, I explain things in one or or two sentences. Keynesian economics has never had a chance of working, not in the United States and not in the world. Why? It is missing two critical ingredients which are assumed to be present but are missing. First, governments are not capable of making economic decisions. Second, a straw man is assumed but there is no such thing. That is two sentences but either statement would suffice.

So, what does a Keynesian solution actually accomplish? There is a feeding frenzy, based on personal gain, to benefit from newly available government money. Income and wealth are transferred from the bottom to the top. The free market principle of out with the old and in with the new is thrown out the window. Resources are allocated increasingly inefficiently until a recession, worse than ever occurs.

So, let us suppose the finest Keynesian model created by the most learned Ivy League economist is used. What happens in that case? The same thing happens as would, if the world’s finest astrologer came up with a plan. Neither has any utility to society. I will say that astrologers charge very little for what they do and they are a lot of fun to listen to. There might be a slight bit of utility on the part of the astrologer based on entertainment value.

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Financial Markets Reminder

Below are some points to remember. At no other time in history has there been wealth concentrated in so few hands. Never before has there been the sophistication and tools for effectively managing stock prices for the personal gain of a small segment of society. Never before has government kept markets for goods and services from clearing. In a free market based system out with the old and in with the new is normal and necessary. Government stimulus prevents that process from taking place. Stimulus prolongs the lives of antiquated businesses for which there is waning demand for their goods and services. Stimulus is a political tool which is very successful at protecting the wealth and incomes of a small portion of society. In doing this, resources become more and more mis-allocated until an economy cannot grow any more. The United States is at that point now.

The market will crash. The sooner it crashes the greater is the possibility the country will survive. Make no mistake there is a consortium which manages stock prices for their member’s benefits. Do I know their names? No, that kind of relative information is not known in the present moment. It is not knowable. The fact is, a market could not rise in such an orderly way if it wasn’t managed. For government to enhance asset values, it is not necessary that the government announce an official program specifically for that purpose. Much more is done by government in a completely unofficial way than by using the halls of congress. The stock market is rising currently because central banks are buying. There is no other reason.

There is much talk these days about a huge impending correction coming soon. Probably a record number of articles have been written to that effect over the past six weeks. Some of these articles are on the level. Others are written for the specific purpose of drawing in short sellers prior to the the early fall which historically is the weakest time of the year.

Chances are, there will be selling pressure. For the market to crash, however,supply will have to be way more than the central banks anticipate. Any outright crash will have to be sudden and before the central banks and their anointed friends have a counter plan. For the good of the country, we should all hope that kind of crash takes place. If the selling is at all orderly, central banks will simply buy up supply. They may even opt to try and manage a controlled correction. Certain central banks already have enormous equity holdings. Do they want to take losses on those holdings? No, so they will keep pumping money into those holdings to keep the prices rising.

There is an additional possibility. The general public could wake up and realize they are being fleeced. A realignment of political power could have a huge impact. Chances are better that the bull market will end when there is hard evidence the economy has been destroyed.

 

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