Stock Market Update

wall-street-bull-market-dead-crime-sceneFor the first time since 2013, I have added some additional bearish positions. All are short etfs. The largest position is in TZA which follows the Russell 2000. The Russell 2000 is the easiest index to manipulate so it is not an easy ride. I am also long BIS which is short the biotechs and TAZ which is short the financials.. I am also long a bear etf for each of the major indexes. All etfs are of the 3x or 2x variety. I have gone from 80% cash down to 70% cash. For the first time in three years, I have a small profit in bearish positions. That will not necessarily be the case in coming days but it is worth the risk now. I don’t know when stocks will tank, but it will happen. I know of know way to time this because central banks, the Federal Reserve included, are buying outright. They are not trading. They are just supporting the market. I know of no analysis that is useful for timing the collapse of something like this. Cash after the crash is the goal. 30% committed to the downside is not unreasonable.

Since the Federal Reserve creates the money it uses to support the market, it is conceivable for the Fed to to become a huge stockholder in the world’s corporations. That is a path to socialism that is never mentioned but it is one way for government to take over commerce. Up until just recently, central banks could count on friends of the Fed which traded risk free in return for supporting the market. Such arrangements are mostly missing these days. Mostly we are seeing central banks buying outright. There is no way to tell how long the agenda can be carried. There is no historical precedent. Face saving alone is a huge incentive. No one on the Open Market Committee wants to explain why the market crashed and the economy crashed following all of their efforts. It will happen. They all know it. They would rather all disasters be postponed until after they are gone. In that case, the new members will get blamed.

In all of financial history, there has never been this large of supply hanging over the market. The breadth is the worst I have seen in all of the years I have been trading. I started in 1968.

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Stir the Pot

stirring-pot-3063194I don’t support candidates. Candidates run for office out of self interest. There is nothing wrong with that but expecting them to immediately take the causes of those who elect them is completely unrealistic. Government provides a way for all participants to get what they want. Politicians don’t represent voters even while voters stubbornly expect them to.

This cycle I am pulling for the few who are stirring the pot. Those candidates are Donald Trump, Ted Cruz and Rand Paul. None of these folks are good people but stirring the pot has high utility to the country right now. Pulling for is not the same as supporting.

Why stir the pot? As it is, cooperation between elected representatives, corporate elitists and the news media is solid. This arrangement is in the process of destroying the country. From now on do no expect much media coverage of Donald Trump, Ted Cruz, or Rand Paul now that two of the three have become aggressive.

Look for each of these guys to get dismissed from this point on. Normally the RNC sends out attack dogs to get rid of candidates who challenge the status quo. I am not sure there is an attack dog brave enough to go after Donald Trump. Trump is highly adept at verbal conflict. Trump also has the “trump” card of of threatening to go third party. If he does that, no Republican has a prayer.

Fascism kills and the sooner it fails the better is the chance that the country will survive. To kill off fascism early it is necessary to break up the unholy trinity of corporate elitists, government and media. Left to their own devices these kinds will mercilessly pursue their own interests until there is a revolution. Don’t forget that in the absence of constant deterrents, government and crime merge over time. Today crime controls government.

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The Health Care Squeeze

011313_HealthcareCOVER_t670Anthem Inc. is in the process of trying to buy Cigna Corp. For anyone who doesn’t know these are Giant Health Insurance providers. There are only a handful of these companies. The story is that consumers will benefit because cost savings will be passed on to patients.

This is the same logic that was employed in Texas as tort reform was instituted. Will lower costs be passed on to consumers? Since all of economics is based on one incentive, self interest, there is no chance at all that there will be savings for consumers. Corporations merge for the purpose of making additional profits and there is no other reason. There is nothing wrong with two corporations merging in order to improve profits. It is wrong to point to a benefit for patients when that is not even a possibility.

What passes for health insurance is actually a payment management system that extracts money out of patients and physicians. Corporations like Anthem and Cigna have no true utility to society. They are a cause of high health care prices. Government guarantees their market. The insurance companies simply skim income off of everyone by using government to force patients and doctors to deal with them. Americans don’t seem to mind but they are being impoverished by this system. In the long run these entities will not survive but they are inflicting a lot of pain in the mean time.

Monopolies, even those created by government, eventually destroy themselves. The process is slow but consumers are constantly searching for substitutes for what monopolies provide. Remember that “only phone company in town.” High prices for land lines and high long distance rates helped usher in the mobile phone. One of the consequences of squeezing physicians is that it creates an incentive to charge patients without providing treatment. Who has not had the experience of going to a family physician and being referred to a specialist for a run of the mill condition. This is how mass marketing medicine works. Herd them in, herd them out and collect collect a fee. This is not a preference of doctors. They have a choice of getting paid for not treating patients or taking a loss. Actual health care is becoming rare.

What happens next? People everywhere are discovering the curative nature of everything from Aloe Vera to oral supplements made from cannabis oil. Watch for doctors in foreign countries to start offering Skype appointments. More Americans will start traveling to Mexico and other countries to get treatment. The black market drug business will flourish even more than it already is. Eventually a few doctors will figure out that they can make a good profit by offering cash patients a hefty cash discount. What is a physician’s profit for an office visit? It is probably less than a patient’s insurance copayment

Don’t look for Americans to complain. They have been told they have national health care by authoritative elected representatives. It may take the average Joe twenty years to figure out that there can be a difference between what a system is called and what it actually does. For those of us who are euphemism free and use commonsense this is not a problem. There are not many of us.

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What is Money?

freemoney2In Ivy League Economics money is created politically. This kind of money works in economic models, none of which provide any utility to society. Money created politically is to economics as a cancer cell is to a human body. Start the process and it grows until it kills the economy.

By using common sense while living a euphemism free life I can easily see what money really is, Money is created when work is performed. Work creates something of value. The exact thing produced by work can be used for money and often has been. A currency can be based on the value of something work produces.

Can you loan money that you haven’t earned? Yes you can if you can borrow politically created money. You can get rich by borrowing politically created money at less than the rate of inflation and loaning it out for whatever the market will bear. Only the political elite are privileged to get such deals.

Using politically created money is analogous to putting athletes on steroids. Performance does increase but in the end the costs outweigh the benefits.

Steroids enhance performance while killing the body off early. Politically created money does the same to an economy. It kills the economy in the end.

They best thing we can say about the American Economy is that it was fun while it lasted. The economy has been destroyed.

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Understanding Donald Trump

x299353078_donald-trump-pres-blogIt seems Donald Trump is drawing maximum heat from both Republicans and Democrats. Trump is also drawing maximum attention. Attention is what all of the others need but have no way to get. Trump may also be the first non apologizer. Demands for an apology are coming like machine gun fire. What will happen if Trump never apologizes? The problem his detractors have is that if Trump does apologize, he is apologizing for telling the truth. The truth is not used in politics so people are confused and disoriented when it makes an appearance.

Don’t misunderstand. Trump is not honest. He has just found a unique set of circumstances where the truth might actually have utility. He has nothing to lose by being straight forward. I see Trump’s discourse as distinguishing him from all of the other candidates. That is a long shot approach but he would have no chance at all as just one member of the mob of sixteen. The other candidates all bury one another with mush.

Do not expect truthfulness out of Donald Trump for the duration of the campaign. It is hard to win an argument with Trump when he is wrong. Telling the truth in the early days of the campaign gives him a distinct advantage. He will be perceived as a straight shooter all the way to the end. All he has to do is not apologize and his early truthful discourse will fade away. The straight shooter image will stick.

Trump may be the best in the world at diminishing others who attack him. I am not sure who will take the risk more than once. Give Trump a black eye. Just expect two black eyes in return.

Would a contest between Hilary Clinton and Donald trump be interesting? The world’s best liar would be squared off against the world’s greatest put down artist.

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Slaves in Search of a Kind Master

greece-flag-oia-background-15998465I recommend re-reading the articles I have already written about Greece and its troubles. All economic problems have the same solution. Government must provide a free market system and remove government as a tool for rigging markets. Since the only solution is a very unpopular approach, the Greeks will likely wallow in their misery indefinitely.

http://quillian.net/blog/what-can-greece-do/ (June 2015)

http://quillian.net/blog/greece-default-or-write-down/ (from 2012)

After 50,000 or so as living as serfs and slaves, the human mind has not caught up with social progress. Ideally, the Greek people would take control of government and run the place in a manner of their choosing. That won’t happen. For the people in Greece, their freedom is a burden they give up to anyone who offers them comfort.

Human nature trusts government, kings and dictators but not free markets. What the Greeks are looking for is a kind master.

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Where Stupidity Rules

NeumanAs 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.

For the most part completely stupid people make up at least 97% of the population. The remaining 3% devote their lives to exploiting the stupidity of all others. Most of this is because people's actions are mostly instinctive when functioning in groups. While instinctive behavior is pervasive and the path of least resistance all of mankind does have the capability to think and act as individuals.

Common instincts include worshipping leaders, treating government as a parent and trading freedom for comfort. Instinctive behavior is responsible for at least half of the maladaptive behavior (stupidity) Americans engage in. Much stupidity in the political arena comes from what I call the expanded Stockholm Syndrome.

Definition (The Free Dictionary by Farlex)

Stockholm syndrome refers to a group of psychological symptoms that occur in some persons in a captive or hostage situation. It has received considerable media publicity in recent years because it has been used to explain the behavior of such well-known kidnapping victims as Patty Hearst (1974) and Elizabeth Smart (2002). The term takes its name from a bank robbery in Stockholm, Sweden, in August 1973. The robber took four employees of the bank (three women and one man) into the vault with him and kept them hostage for 131 hours. After the employees were finally released, they appeared to have formed a paradoxical emotional bond with their captor; they told reporters that they saw the police as their enemy rather than the bank robber, and that they had positive feelings toward the criminal. The syndrome was first named by Nils Bejerot (1921–1988), a medical professor who specialized in addiction research and served as a psychiatric consultant to the Swedish police during the standoff at the bank. Stockholm syndrome is also known as Survival Identification Syndrome.

The Expanded Stockholm Syndrome, applies to people as they relate to their leaders. The relationship is the same as what and individual experiences when held captive. In politics, people have a strong tendency to become loyal to anyone who is their leader or elected representative. This is completely instinctive. The majority are susceptible to this quirk of human nature. This is why bad incumbents get re-elected over and over again.

Then human beings reject the truth and replace it with euphemisms. The result is that persons, places, things and actions are defined as different than they really are. Great comfort comes from the use of euphemisms. The fastest way to become happy is to believe lies. The truth is really not that awful but it is unchanging. The truth can't be any better than it actually is. Change the truth a little and people like it a lot better and it becomes a lie. So the truth has a tendency to get squeezed out of discourse.

But then there are the 3% who are not stupid. While while the 97% of the population keeps themselves busy with jobs, kids, school and other things, the non-stupids (3%} work full time extracting wealth and income out of the masses.

The above paragraph summarizes the cause of the economic problems the United States now faces.

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Will Mankind Get Lucky?

Greek-Referendum-Trafalga-009What do all nation's citizens have in common with the Greeks? The Greek people have no influence over their government's spending. Neither do the citizens of Germany, United Kingdom, France, or the United States. Why would the Greek people feel a moral incentive to pay back money that was spent without their permission?

Like the American's Greeks have never reined in government. For that they deserve to consequences of allowing their government's spending to get out of control. Still, they feel no moral imperative to impoverish themselves to support a system that does nothing but exploit them.

If mankind is lucky, the Greek referendum will begin a reckoning process and a crash of asset prices. If such a thing happens it will be after a worldwide emergency buying spree by the Federal Reserve and other central banks.

On Monday morning, all central banks will be in the save the stock market mode. Saving the stock market is not as easy as it used to be.

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Worst Period in U.S. History?

GDP_economy_DOWNThe worst period in United States history has begun. Bad times like the one we are entering, like the Great Depression and the World Wars, are caused by dishonest government policy.

Quantitative easing has destroyed the viability of the economy. From the beginning, there has been no reason to expect, quantitative easing to be of benefit to the economy. Government tampering with the financial markets began in 1987 and has continued without interruption. Faith has been placed in econometric models while such models have not once produced usable results. This has been nothing short of complete stupidity on the part of the public and wishful thinking on the part of others with more savy.

Now most Americans can expect to lose everything they own. Losses will probably accrue rapidly. Jean and I are positioned as well as possible to weather the storm. I as still 75% cash and 25% short positions and bear ETFs. I realize that even cash in this kind of situation is not all that safe but there simply are no assets that are not vulnerable to a horrific washout. It is better to fore-go a 2% return that can only be achieving by taking a chance on a 40% decline in price.

The world is over financed and clouds of stupidity are engulfing the populations of all developed countries in the world. The bottoms are going to fall out from underneath every economy in the world. The consequences of stupidity are always suffering. I am sorry. Americans have been completely stupid and are going to suffer in ways that aren’t currently fathomable,

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The Role Of Government

EconEdLink-190-the-role-of-government-the-federal-government-and-fiscal-policyDifferent countries assign different roles to government but in practice all governments do primarily just one thing. Government provides a way for super smart people to exploit the stupidity and instinctive behavior of the general population. So far a 50,000 year time line of history provides no exceptions.

Being stupid, the human animal insists its government performs the tasks with which it is assigned. Common Sense Economics is constantly right where others are wrong because institutions and people are studied according to how they functions and not according to how they are defined. Those who base their lives on euphemisms always end up disappointed.

“You can’t cheat an honest man. Never give a sucker an even break or smarten up a chump.“. _W.C. Fieldswc fileds

In the above quote, Fields adequately describes the approach of presidents, congress and just about everyone who gets elected to public office.  The public doesn’t seem to mind.

 

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