The Fed and Corporate Buy Backs How it Works

Like any issue the corporate buyback phenomenon which keeps stock prices “eternally” rising is simple. Lofty explanations and complex answers evolve because the real one is unpleasant. Nothing that happens in government is any more complicated than making up plays in a sandlot football game.

The Federal Reserve is under a political directive to elevate asset prices, especially stocks. Corporate insiders figured out right away that with the central bank policy the fastest and most efficient way to make many boatloads of money is to use as much free money as possible to engage in corporate buybacks. The reasoning is this. “to heck with research and development. There is no longer a need to invest in plant and equipment. Lets just hype everything, buy our own stock and drive the price into the stratosphere. Making money is why we are in business. Government wants stock prices up so much they aren’t even enforcing accounting laws. Lets do it while it is easy to do. Get is while it lasts.”

The brain is not a fairness seeking organ. Although it seems to be thought of in that capacity. The brain figures out how to survive and prosper as fast and as efficiently as possible.  Corporate buybacks are more efficient than working hard and coming up with new stuff.

So where does the Federal Reserve enter the picture. The Fed’s goal of just sweeping asset prices higher is completely compatible with the corporate goal of making as much money as possible in the shortest period of time. No conspiracy is necessary. Winks and nods are all it takes. The following is how the Federal Reserve orchestrates corporate buybacks.

“Good morning Mr. corporate financial officer, this is good ole’ _____,clerk for the Federal Reserve. You may remember me. We talked a number of months back. We are constantly monitoring and adjusting so,  as you are aware, we do a lot these surveys. This is completely confidential. Sir, last year corporations found it beneficial to buy back some of the outstanding shares. In your opinion, do you believe this practice will be increased or decreased over the next 12 months. Oh, sure all of this is relevant for discussion at Open Market Committee meetings. Bla……Bla……..Bla…….”

After the conversation, the financial officer has no doubts that the Fed likes the buy backs, will make all the money needed available and has his back. So, the buy backs go on and the Federal Reserve continues with its political agenda.

The formal political system in the United States keeps the minds of of constituents busy while everything that matters is done outside of the public eye. It is always a mistake to look for complex explanation of what goes on in public life. The real explanation is always too simple. It usually puts people in a bad light so complex explanations are used instead.

 

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School Shootings and Bullying

School shootings and Bullying need to be explained in terms of herd dynamics.

Lets start with bullying. Animals have ways of eliminating the weakest among them. Herds turn against individual animals they don’t want in the herd. The kid who gets bullied today eons ago would have been killed off. In schools children determine each other’s position and status within the herd. Bullying is part of the process.

So, what about school shootings? In early years, being rejected is devastating. It is a life changing experience. Instinctively, being part of the herd is a matter of life or death. Being kicked out or not accepted by the herd is a death sentence in most species.

When a student picks up a weapon and opens fire on other students and teachers, it is backlash for having been rejected. There are many other ways people react to rejection. This is one of them.

 

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How to Predict the Future

It is much easier to successfully predict something is going to happen than it is to come anywhere close in predicting when it will happen.  I have been forecasting the complete collapse of the United States economy for a while. The Great Recession of 2008, as it is called, never really ended. What we have have been calling a recovery is about the same as a man losing his job then borrowing enough money to continue his life style for a few more years. It is really hard to figure out how long it will take lenders to stop loaning him money. But, you can count on that happening.

The only difficulty in predicting the future is the necessity of discarding the belief in comforting lies. Once the comforting lies are gone so is the happiness which came from believing them. A fantasy free life is not for everyone. It is such a high state of sobriety that it can be unpleasant. I explain it but don’t automatically recommend it.

What is it every human on earth is avoiding that is so bad they engage in fantasy so as to escape? There are questions that have no answers. There are things we must do that we would rather not think of ourselves as doing.

We know we are alive but we don’t know what life is. We don’t know what we are or why we are here. Some talk of the gift of life. Is life a gift or is it a forced obligation? What happens to us when we die? Then there is the process of survival.

Notice that the earth operates as a big game of dominance and subservience. Living things live by killing and consuming other living things. The species at the top is the one that best dominates all of the others. Where does leadership come from within a species? Leadership goes to the most dominant animal within the species. The President of the United States, is the most dominant person in the country, possibly in the world.

Our situation is harsh. It is so harsh that fantasy is necessary for survival. A better word for political science would be herd dynamics. A better name for economics would be the study of survival. To predict the future all you need to know is what people are running from and how much fantasy they are indulging in. Then all you have to do is use the gift nature has provided.

Nature provides a way to read the present. Is there danger? Are there opportunities?  A person’s read of the present is extremely accurate provided the mind is free of fantasy and euphemisms. The present moment and how to survive might be as close to reality as we are likely to get. Fantasy is a prism through which the world is viewed. So, to to predict the future just be fantasy free and you accurately assess what behavior leads to what outcome. It works as well on a national level as it does on an individual number. Anybody can do it. The hard part is being fantasy free. Until you get used to it it is like being on a starvation diet or going through withdrawal symptoms.

 

 

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The End Is In Sight

So what is if for which the end is in sight? Attempts at self government have never really been started so it is not that. Certainly Americans are not going to give up virtue signaling. Humans are not going to give up their herding instincts. They will not stop worshiping their leaders. Mostly what is ending will never occur to the average person. Perhaps it will all be taught in a history class fifty years from now,

What is ending is a many decades long government asset enhancement initiative. It is not ending because of lack of interest. The process of the government forcing up high asset prices is ending because that practice had destroyed the United States economy. Do Americans care? Probably they would if they were not clueless to the fact that it has been ongoing since Ronald Reagan was in office.  Asset enhancement has been like food stamps for the rich although asset enhancement is far bigger than food stamps. Is capitalism the blame? It can’t be. Using government to rig markets and extract money out of the poor and middle class is not an attribute of capitalism.

Government forced high stock prices are coming to an end. The end of prosperity of the average American is also in sight.  The economy of the United States is destroyed. Running stock prices up to create aggregate demand provides only temporary prosperity and for only a few. We will see the end of that practice for at least forty years.

None of this will end because of new information and better ways of doing things. The only reason for these things will end is because, there are no more ways to enhance the value of assets through the use of government. The parasites have killed the host, or at least have weakened the host so much that it cannot function as it needs to.

It is silly to try and blame this on one particular president. Presidents are clueless when it comes to the financial markets and economics.

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My Guarantee

 

The economy in the United States is going to collapse. I guarantee it. I am sorry. But still, I guarantee it. Why?

Government honestly cannot stimulate an economy. Economists in countries all over the world are paid to make the case that governments can stimulate economies. Government economists get paid to justify anything government initiative.

No government cannot stimulate an economy but virtually all citizens believe it can and would be scared if the effort was not made. Stimulus can and does misallocate resources and transfer wealth from ordinary folks to the politically powerful.

Why can’t people figure out they are being fleeced? For all but a minuscule portion of history mankind lived as slaves. The minds of modern humans are programmed to serve a master even though officially there is no master. According to the constitution citizens are charged with the responsibility of overseeing government. This concept is acknowledged, appreciated and accepted intellectually. That doesn’t matter. Intellect is not used when people behave in the aggregate. Race memory kicks in. At very deep levels of the mind people treat elected officials as masters.

Perhaps three percent of any population is born with an unlikely set of personality characteristics. These are presidents, congressmen, senators and elected officials of all kinds. They are naturals at getting other people to do things. They feel entitled to what other people have. Perhaps this is natures way of providing masters. They are also very intelligent and acquire power easily. To these kinds, everyone is a potential servant.

The situation we have in the United States is one of aspiring masters and seasoned masters using government as a means of extracting benefits out of the the masses. While citizens have convinced themselves that they are in charge of government they certainly are not. At the deepest levels of their minds, voters are electing the best possible master.

As stimulus progresses, the out with the old and in with the new properties of a free markets are disabled. Resources are allocated more and more inefficiently as time passes.  The United States economy can no longer grow because the most important elements of the free market system have been removed and replaced with central economic planning. Is that too simple? Yes it is. It is so simple that complex reasons will be manufactured so as to avoid looking at the true cause. That is where complex models come from.

If you can see that sound economic principles are being violated by law over a long period of time then you can be certain an economic collapse is coming.

In a free market system, government has a huge role to play. Free market discipline must be enforced. Our government does just the opposite. Citizens are hardwired to treat government as their master and they do so. This weakness is used by others who are born with political personalties to exploit the general population.

 

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Stock Market Comments 02/05/2018

As some may remember, I thought as 2017 closed out, there would be weakness in early January. The opposite occurred. My main point was then and is now that high asset prices by virtue of the stock market are the only source of demand in the economy.

The notion that rising stock prices will move GDP higher and draw the non wealthy members of the economy into the party is the justification for the Federal Reserve policy we have known since 2008. What is a PhD in economics good for? It is of great benefit to the one who has the degree because he does not have to prove anything. No effort will be spared by the elite to prevent a stock market reckoning.

A 666 drop in the Dow, is not a good deal for the Deep State. As, I have mentioned in previous posts, no effort will be spared to keep stocks moving higher and for sure to prevent a deadly crash. That is providing the political climate does not change.

The so called bubble is nothing more than a mature political agenda. As long as the political structure is in tact, efforts to turn the market up will be ongoing and relentless. The political system does seem to be falling apart. The chances are still very good that the central banks will escalate their outright buying. Suppose the market can no longer be supported despite pressure from the Deep State and the best efforts of the central banks. The public will be forced to take the losses, as happened in 2008.

People know instinctively that the government can stimulate the economy. People also know instinctively that experts within government can make life fare and solve every problem. What folks know instinctively does not work in the real world. Instinctive behaviors change very slowly, much slower than intellect. There was a time, when faith in authority and adherence to a group was completely necessary for the task of survival. Count on people to do what they are programmed to do instinctively. Trust government. Put faith in government. The alternative is to accept complete uncertainty as unavoidable and as the way of the world. Way down deep in the reptilian brain people are compelled to treat government as a parent.

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Gods of the United States of America

The big advantage to being Fantasy and euphemism free is in knowing what is going on in the world and knowing what to expect in terms of human behavior. For most people, seeing reality is akin to staring directly into the sun. It is much too harsh for the naked eye. Looking at the world and the universe without the prism of fantasy makes happiness very difficult. So for me happiness difficult to achieve. It is a choice, happiness or seeing reality. I have to ask. If happiness is not possible without believing lies, is it worth it? For me, I choose to live as close to the truth as I possibly can. Happiness can wait. Peace is a better option.  Happiness always has an expiration date. Peace is permanent.

Even though people profess to worship God as Christians, Jews, Muslims and others, in the United States they actually worship their leaders. In, the United States, where are faith and trust actually placed? Faith and trust are placed in leaders.

Most know that in ancient times, different populations worshiped different gods. The Philistines had one god. The Jews had another. When there was a battle, the side with the most powerful god won.

Notice that Americans don’t really participate in in self government. Some vote but when they do, they are electing a god. In 2016 United States citizens were electing their god. The god of conservatives was Donald Trump. The god of liberals was Hillary Clinton.

In ancient times, in wars, it wasn’t just the people who fought. The side with the more powerful god won. People of the less powerful god always served the people of the more powerful god. Democracy is actually a lot like a war. The big differences are no guns or swords.  In the United States today there is great fear among all who worshiped Hillary Clinton that they will be forced to serve the worshipers of the more powerful god, Donald Trump.

Please don’t think I am trying to be funny. This is the precise mentality of the people of the United States of America.

 

 

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Authority of the Military

I am frequently shouted down and called every thing from disrespectful to a traitor when I point out that the U.S. military consists of mercenary soldiers fighting wars for profit. But, actually who is being a bad actor? I am a civilian. That means I am part of the sovereign.  Where does the military get its authority? From the sovereign.

As a part of the sovereign  it is my job to rein in the military when the military is doing immoral things. The notion that every citizen has to support every activity the military engages in is completely dangerous.

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Trump’s Good Employment Numbers

Trump designs a cut tax and spend program. Trump designs new protectionist trade policies. Voila’, miraculously major corporations start giving bonuses to ordinary workers and doing all kinds of wonderful things for employees. Those are amazing dynamics, custom made to impress the general population.

How did all of the hiring, bonuses and other wonderful things actually come about? It works like this,

“Hey Walmart, this is the Trump administration on behalf of your president, good ole Donald Trump. Is there anything we can do for you over here in Washington? Oh, that. Well. it is sure doable. Can you help us out in return? For example, if you were to implement a pay increase for ordinary workers, that would sure make your president look good. A lot of corporations are helping out by giving out bonuses. Yes, yes yes, that will be just fine. And, what is it you need again? Consider it done welcome to the team………….Hello, Home Depot? this is the Trump administration………….”

One thing protectionism does is richly enrich a handful of corporations. Who is going to be helped? Just look at the companies which are now doing wonderful things for their employees. Outside of a free market system, goodwill does not exist.

 

 

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The Stock Market is Not a Bubble

Rush Limbaugh has flourished creating and exploiting the bubble in virtue signaling. As socialism goes on forever, opportunities to exploit the bubble in virtue signaling keep growing.”

Stocks are not being bought as investments. Stocks are not being bought because the public is giddy with optimism. What is being called a bubble is nothing of a kind. Stocks are being bought as a means of as a means of centralizing the world’s factors of production. How do I know? I am watching the process. Calling it a bubble certainly facilitates the task because the world’s population has no idea what is happening to them.

Where is the proof? You will have all the proof in 40 years after all the actors are dead and books are being written. The Gulf of Tonkin in the sixties was a real event. Today, we know the incident was manufactured by President Johnson in order to escalate the Vietnam War. The Battle ship of Maine was not actually blown up by the Spanish. It was blamed on the Spanish as an excuse to take over Cuba. In forty years you can read about today’s bad actors crime’s in an academic setting.

The stock market bubble today is not a real bubble. Central banks and on behalf of the elite of the world are being used, to corral the world’s resources into the hands of a  wealthy few. When accomplished, the Deep State masters will have and even easier time of determining what is bought and sold in every economy. Labor can be managed at much lower wages. Their control is already enormous but why stop there?.

The window of opportunity is there. Self government is being rejected in every country of the world. This is on the part of citizens. Virtue signaling has replaced all efforts to rein in government in the United States. The bubble is in virtue signaling. There is an entire industry devoted to virtue signaling. Conservative talk radio is an effervescent bubbling well of virtue signaling.  Add up all of the talk radio show host in the world. Then count the demonstrative conservative initiatives they have started. Zero is an actual number in the real number system. So they have actually started a number of initiatives, zero. How many laws are they trying to get repealed? Conservative dialog flies in all different direction. “It is the liberals who are the problem. Set those liberals straight.” They say. The liberals don’t do as much virtue signaling but they are getting absolutely nothing. Congress withholds and hordes information. The media is owned by the Deep State and promotes their aspirations. To American voters messiah seeking is the preferred political activity. Some voters wanted Hillary as their Messiah. She lost. More people wanted Trump as their messiah. What does the average voter know? Absolutely nothing. What do they think they know? Everything. The deep state has absolutely nothing to worry about with respect to conservatives among the world’s population. There aren’t any.

The world’s population is volunteering for slavery. The deep state is accommodating them. Is the stock market in a bubble? No, the central banks are buying up the worlds factors of production. That is why stocks don’t go down.

 

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