Tuesday, July 25, 2017

"The Hungry Bear"

The stock market bear is hungry. His fangs are out, but the stock market has a fang, too. FANG consists of Facebook, Amazon, Netflix and Goog—all of which have made fantastic gains during the current bull run. These stocks are bloated pigs, but the bear continues to be thwarted.

Since its tragic inception in 1913, the Federal Reserve has made sure we got plenty of war and bubbles, including more recently the Internet Bubble, the Housing Bubble and now we have the current bull market. Some are calling it ‘the greatest bubble ever.’ 

There are a variety of reasons why the market continues to relentlessly escalate to record levels. It has nothing to do with the presidents who like to take credit for such climbs. If insiders wanted the market crash, they could have done so when Trump was elected president. They didn’t want to shoot themselves in their collective foot and lose money, so there was no crash.

The continuing rise has to do with low interest rates by the Fed which has forced money into top companies. Betting on stocks is less risky than loaning it to small businesses or putting it into the already overpriced real estate market. Invest in Illinois bonds? Oh, well never mind. How about precious metals? No, that sector has been in a bear market since 2011. Paper covers rock and the central bankers can print up an unlimited amount of paper silver to keep physical silver contained. They can’t short Bitcoin, hence the amazing rise there.

The stock market seems to be the only game left in town, but who is playing that game? Certainly not young people. They are too burdened with college debt and are having a difficult time finding jobs that pay a decent wage. Real wages haven’t risen much in 30 years, but inflation and taxes have gone up. The cost of living has hurt the American Dream. Rent continues to skyrocket. Landlords are enjoying a bull market because young people can’t afford to buy an over-priced home, even with low rates. Not many young people can't pony up $1,000 to buy one solitary share of Amazon. Also, Baby Boomers are cashing out of the market and retiring. The middle class is going away as the rich get stupendously richer while most of the country gets poorer. 

So who is doing all the buying? Insiders, that’s who. They already own most of the stocks and they know that driving up their investments benefits them very well. Global corporations, many of which pay no taxes at all, buy back their own stocks, thus benefitting the insiders. The central bankers do the same. The richest 10 percent in America own 80 percent of market wealth.

Before you accuse me of inciting class warfare, let me remind you that a lot of that wealth at the top is compounding not because of capitalism, but rather crony capitalism. Mega corporations and their lobbyists control Congress and they make sure conditions are kept in place that allow them to make successful inside bests in the mega casino that they own. President Clinton ended Glass-Steagall Act, which allowed the big banks to gamble, and what happened in 2008 showed us who really runs the show. The central bankers, represented by Hank Paulson, twisted the arm of Congress in order to rake in trillions in bailout money as well as gigantic bonuses. Quantitative easing and free money helped the bankers and Wall Street. Not Main Street. 

When will the bull market collapse? Some say this year, but we’ve heard that every year since the last drop. The doom and gloomers continue to get it wrong. People such as Martin Armstrong, who is predicting the market will double again from here, continue to get it right. The technicals show weaker pullbacks and smaller gains on lower volume. The signs point to a blowoff top and that is attracting a lot of short interest, but many traders have already shorted the market and individual stocks again and again, only to get burned again and again. The bear remains very hungry.

--Ben Garrison

P.S. I had a really bad typo--typed 2013 for the start of the Fed. It's 1913. I fixed it. My apologies. I don't have an editor and my editing skills aren't all that great.

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