Printing False Hope in a False Reality

money printing

Western, especially U.S., equities have become the leading sentiment indicator for the masses. And while the masses are not necessarily participating, a closer look at this false dawn reveals that the rise of equity buying panic may actually be the leading negative sentiment indicator. 

Still buying into the market are only those who still have a job with a matching 401K, and a greater proportion of these individuals are just collecting the match and holding it in "safe" mode.  

The equity markets have become no different then Social Security. Most of us don't believe it will be there when we need it and, thus, resent the system which forces us to participate.  The base of this Ponzi is quickly eroding and the top is becoming more unbalanced by the day.

It seems that not a day goes by without a large or famous fund manager coming out of the woodwork with a warning about what is about to go down. It is as if those in the business of managing other people’s money are in ‘cover thy rear’ mode. When there is no longer a way to profit from the intervention, it’s time to leave the game.

This has been the greatest game of manipulation, thievery, insider trading, and general overall corruption ever. And I’m not just talking about silver and gold paper markets. Equities are victim to the same fundamental phenomena. What is even more amazing is no one has looked closely at the corporate buy backs. Or margin debt levels. 

Alas, you can talk till you are blue in the face. But the average investor will not act until you say “when” with enough conviction that compels action. It’s a horrible mentality — a collective belief that we can’t possibly understand these markets. 

In reality, executives and directors are issued stock options. Then they authorize buy backs so the options become in the money. They are grossly enriched. Their companies did not have to make a product, employ people, or make money. All they had to do was borrow money at "zero" then buy their stock.  

The orders are done at the market and they (many of whom happen to also be the brokers) flow orders through and front run the market with their own option buying. 

What’s perhaps even more incredible is that they get to keep it all — even when they ultimately crash. 

Executives are motivated by quarterly earnings and stock valuation. The Fed has control of the stock markets through the E-mini futures, jamming them higher like an applause meter, or when they want asset prices higher.  

All they have to do is hit the electronic buy button, force the futures to a premium, and the HFT will take over from there. 

The people of the world can't even earn interest on their savings, nor is the job market improving anywhere except in the fantasy dreams of the manipulated media orchestrated by the Central Banks/planners.

‘Muppet’ has become the derogatory term the smart money uses for the retail investor. 

The declining number of Muppets is willing to invest in equities (while the Jamie Dimons of the world continue to churn the market hoping for the elusive escape velocity that cannot come if the Muppets refuse, or are unable, to play along).

They are all just looking and hoping for that opportunity to buy low and sell to a Muppet at a higher price; be it in a nanosecond, an hour, or a day. No value added. 

Nothing. Simple wealth redistribution dependent upon fear and greed.

It's not exactly irrational. Those responsible know exactly what they're about - a pump and dump courtesy of the Fed.

  1. Use ZIRP to load companies up on debt to finance stock buybacks at several times fundamentals.
  2. Get clear into something likely to maintain its value no matter what (viz. Russian equities).
  3. Watch the fun as the crash knocks a good 20 percent off private sector wages (before taxes) and wipes out what remains of the proles' net worth, life savings and pensions.

The vast majority are still trimming their cable bill down and deciding between coloring their hair or buying groceries for the week. But the smart money community is still led by the legends - the big hedge funds or bond funds. Therefore, they are bound to stay within accepted convention in order to protect themselves against liability. 

It’s absurd, but the conventional view of portfolio management has also been quietly infiltrated and commandeered by price performance - from a trader’s perspective - not a value investor. Therefore, based on price performance, the metals have performed poorly. 

Of course, a quick look at the underlying fundamentals reveals a shocking disconnect. But an honest answer to the question about the fair value of precious metals would require yet another unconventional view that rarely makes its way into a money manager’s thinking — that of manipulation.

In the end, it will very likely have been better to be a bug than a Muppet.



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