but me, i'm all ready gone...
Posted on 09/06/2010 9:39:41 PM PDT by DeaconBenjamin
The increasingly popular Jim Rickards once again takes center stage at King World News, this time focusing on the two ever-fascinating topics of market manipulation and hyperinflation. Kicking it off in fine form, Rickards notes that the "markets have ceased to function as they are intended - traditionally a place to exchange values, but more importantly to perform price discovery (people rely on markets to tell them what to do or to at least give them some guidance). What's happened is that all the markets have become so badly distorted that their price discovery function and therefore the information content around it no longer has any value."
The primary culprit in this distortion is, of course, the Fed which is now and has been for over a year, openly (and not so openly when it comes to stocks) manipulating the broader market: "I always like to say if a private sector person does it, it's manipulation, but if the government does it it's policy. So they call it policy and they would say they had reasons for it, but in fact it was massively distorting."
And on the oh so obvious extension from this argument to the "$1 trillion+ cash on corporate balance sheets" theory, Rickards says that this is "not healthy at all, that's a very negative sign because it means that people are afraid to allocate capital because they cannot get good information from the markets. In effect the US and policy intervention from homebuyer tax credit, cash for clunkers, quantitative easing, mortgage purchases have in effect destroyed our markets, they no longer give us valuable information."
Obviously, today's most recent battery of micro fiscal stimuli announced by the administration will merely make the market even more irrelevant as a price discovery and a capital allocation deterministic mechanism: and the more administrative meddling, the more money will sit on the sidelines, and the more retail investors will withdraw capital from risky assets.
If you no longer invest in stocks, you are not alone: "I don't even take the stock market seriously" says Rickards, "and I mean that in all seriousness. Who's in the stock market right? You have indexers and robots. Is anybody else trading the stock market?" Obviously, that is a rhetorical question.
Rickards continues by blasting the now-prevalent, and well-documented high frequency trading feedback loops, that endow the market with a certain broken fractal quality: "the market has become self-referential, an algo playing itself out, almost the way you would run a self-recursive equation on a computer and you get very unpredictable results from very simple equations. It has degenerated into a joke.
"Everyone is looking around for the cause of the Flash Crash: what you find in complex systems is that the cause is almost irrelevant. What matters is that the autonomous agent, the participant, the elements of the system are prone to catastrophic collapse, so once you are in that mode, once you have that scale and that degree of complexity so that you are prone to collapse, the catalyst doesn't matter. If you have an avalanche who cares what snow flake started it, what you care about is the instability of the mountainside.
"The Flash Crash was the warning, I don't think the warning has not been taking very seriously. The markets are not reflecting fundamentals, because there are no more fundamental traders. It is an accident waiting to happen. I recommend to clients that they not be in stocks anymore. I don't take the market very seriously up or down because it has no informational content."
Luckily more and more see through the charade with every passing day.
Rickards covers much more, including the Fed's empty bazooka and the only option left, the nuclear one, hyperinflation, as a function of money velocity exploding, and, of course, gold, on which topic he says the following:
"Gold actually brings me to my second point about Fed policy, we said are they out of bullets. They don't think they are, they think they've got quantitative easing they can do in much larger size. I don't think quantitative easing is a bullet that's going to work. I think that chamber is empty. But the Fed does have a bullet that they may not even realize which I call 'The Golden Bullet.' Which would be basically conducting open market operations in gold in such a way as to devalue the dollar.
"If you're worried about deflation and you want to cause inflation and you're printing money as fast as you can and the inflation is not happening, at some point you have to stop and ask yourself well what else can I do? Well the answer is that you can severely devalue the dollar against gold...So the Fed wakes up one day and as fiscal agent for the Treasury, we're a buyer at $1,495 and we are a seller at $1,505, and that represents a 20% depreciation in the value of the dollar.
And the arguably most interesting observation by Rickards, which follows logical from the prior statement:
"You have to scare the American people into spending money. Right now the American people are more afraid of not having money, they are not afraid of inflation, but if you make them afraid, they will go out and start spending. So what better way than to devalue the dollar 20% against gold, and the way to do that is through open market operations...Well if that happens to be $2,000 an ounce what have you done? You've depreciated the dollar by not quite 50%.
"Well that's pretty powerful stuff if you are trying to get people to spend money and dump dollars. So they are not out of bullets, they have what I call the golden bullet...They have that kind of ace in the hole if they really want to trash the dollar."
As Kohn today said, it is all about expectations... Well, why not make people expect that the dollar they have today will be worth half as much tomorrow versus gold? Fascinating stuff, and one can be sure this is precisely what Alan Greenspan is whispering in the ear of his client John Paulson on a daily basis.
I don’t understand what people are afraid of, if the market goes haywire or we have another flash crash, the plunge protection team will step in and save the day, or the SEC will just void out the previous days trades, reset the trading clock and give investors a “do-over”...
BINGO:
Word is the market will take a 20% dive this October. Sometime. 70% likely to drop 2000 points.
Thus, to protect assets from a more serious drop, sell now, and either hold the cash for a good buy later, Post November Election, or buy Silver Coin and wait longer.
Stay in the stocks ONLY if you can take a 20% or greater loss risk and plan to be into these same stocks in 10 or more years.
Those of you planning to sell some anyway and retire, in the next few years, should go all out NOW! Cash or Silver will be a better risk for anything under 1 year recovery.
Assuming two things: The Dems do NOT pull any crazy lame duck crap AND... AND the GOP wins big and then IMMEDIATELY UNDOES that crap.
Some of the information is rather detailed and I have had to go to financial definitions many times to follow the topics. But it has been worth it.
The market is getting a little bump over the GOp winning seats in Nov.
It will not make much difference to people with money. They are sitting on it until Obama is gone. Unless the GOp impeaches and removes him then nothing changes.
The idiots in AZ made sure McCain will win again. Too many RINOs are around. The American public are idiots who are brainwashed by TV and ball games. Total morons. ObamaCare is the first Islamic tax and non-muslims and the public has no clue. They are idiots and cowards who are addicted to TV.
It’s probably too late to prevent the Democrat melt down, but it’s not too late for them (Democrats) to try to prevent a meltdown by doing what they should have done 18 months ago. For that reason I’m kind of bullish near term.
but me, i'm all ready gone...
might be but the market already has a low PE. around 10 as I understand it. A couple years ago the market PE was about 20.
I don’t think there is any upside from now through the election.
But right now people are thinking and rightly so that likely the pubbies will win come november and chop down the deficit in 2010. obama in canada last june said deficit reduction would be next year’s big chore.
Move old 401K’s into a self directed IRA. Have that put into a money market. No penalties, and your money just sits there.
Stocks go up ... you make nothing. Stocks go down ... you lose nothing. Put cash in pre 64 coins. JMHO.
Check Barrons. The S&P 500 index P/E all the stocks is closer to 18 to 20.
To others - also consider mutual funds or ETFs outside of the USA. Other countries are doing suprisingly well because their populace is not filled with robots brainwashed by TV and NFL/NCAA ball games from 6 TV networks owned by Saudis and other Muslims.
Not everyone in the world is morons who elect a muslim to destroy their country. Canada, Australia, Germany, SE Asia. Not all people are idiots.
“The American public are idiots who are brainwashed by TV and ball games.”
And don’t forget the “Real Housewives” of NY, NJ, Atlanta, and Orange County!/s;)
250 is the new 40.
“the us dollar is worthless paper”
How come it’s OK for them to print up worthless paper backed by nothing, but it’s a crime for the peasants to do the same thing?/s;)
Half of all Americans are above average.
Sorry Ray. I wish Obama was a normal dem who would run to the center to save his party. He is not. He is a radical Muslim who is seriously intending to destroy America and is duping the Democrats as well. He will not alter course. After the 100+ seat holocaust in November, he will push HARD for “revenge” bills in the lame duck session.
Ignore any conventional thinking when it comes to this creature.
free trade and open borders has destroyed us and not one leader understands this. the economy must stabilize itself with the rest of the world. therefore our standard of living must decrease or theirs must increase. since there are many billions more of them then us. The logical step is for ours to fall. that is the end result of free trade and now that the companies have destroyed the golden goose with their pursuit of the biggest profit margins the USA economy is in freefall and can no longer support the expensive products prices of the cheap products made in China and mexico. and the leaders answer is INFLATION? increasing prices will drive what little demand out of the market altogether. Inflation will cause everyone to become a rancher and farmer. inflation will cause hunting to spike. Inflation will cause more unemployment as demand nosedives. Do these idiots not understand the basic economic law of supply and demand. there is no demand so they want to drive up price? increasing prices drives down demand and causes supply to shrink as the lack of demand inflates inventories companies will cut back production.
What a completely vitriolic post. You certainly do hate Americans.
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