I think outside of mainstream market pundits, there’s a general consensus that the market is fixed. The Gold Bugs certainly seem to often be of that opinion. The SMH, or Stoopid Market Hypothesis, tells us that the greatest source of loss in the markets will always be action based on incoherent beliefs.
Take a Gold Bug who doubles down on his gold investments because he believes gold should be $5,000 or $10,000, and that it is only being held down by a massive and ineffable secret cabal. Let me ask you something, would you bet on a fixed boxing match?
The answer to that question is, “that depends on who is fixing it and for what purpose.” People who gamble on horse races seem to have the right idea. Learning that a race is fixed is considered money in the bank. It’s the perfect bet. So long as you know which way it is being fixed, you can bet on the horse you know will win, or in some cases, the horse you know will lose.
The modern stock trader, or Forex trader, who is subordinate to the Stoopid Market Hypothesis, will do the exact opposite. Knowing that the race is being fixed against gold, he will bet on gold.
Right now there is an incredible amount of funny dealing going on behind the scenes to prop up global economies. Central banks are printing money and lending it out at 0 or less than 0 rates. Companies are taking out loans for massive buyback programs driving the stock market valuation still higher. Whenever people realize this they balk, they cry, they shudder: How dare they!
The Stoopid Market Hypothesis in action.
What do you do when you meet a man on the road who has a tiger by the tail? You rob him blind is what you do. Because you know he can’t let go of the tiger.
For people who pretend to worship greed, I’m pretty sure they’re doing it wrong.
If you know the Central Banks and Governments of the western world are committed to a program of propping up the unmerited valuation of the equities market, are lending out money are 0% or less, and that the moment they stop it will all come crashing down, it’s time to start looting.
You see, while all these nervous nellies are worrying about being left holding the bag, everyone else is making their escape with the silverware. Which means all of the morons standing around arguing the finer points of economic policy, or the ethical merits and moral hazards of poor fiscal decisions are precisely the idiots who will in fact be left holding the bag.
Anyone who isn’t spending at least 75% of their time trying to figure out who the sucker is, and the other 25% making sure it isn’t themselves, is cruising for a bruising.
Anyone sounding the alarm on the current bull market is 1 of two types of idiot. The first type is the person who values social opinion more than money. They’re the type who are addicted to being right, or more specifically of being seen by others to be right. The second type of person is the one who is hoping to make money by scaring people out of stocks, the reverse-pump-and-dump, or Dump and Pump(TM). Not everyone who claims the sky is falling believes it, many of them are just selling cloud insurance.
The key factor, as predicted by the Stoopid Market Hypothesis, is that a watched market rarely crashes. It’s only when everyone breathes a sigh of relief that the problems are in the past and there’s smooth sailing ahead does the market usually go tits up.
The reasons for this are many, aside from the tiger by the tail analogy, but prominently it’s because The Market Is Fucking With You (TMIFWY). At some point around QE2, the grotesque influx of liquidity led to the market becoming self-aware, and also gained a wicked ironic sense of humor. At this point it’s just taking the piss, and waiting for enough people to line up with bright and shining faces filled with hopeful guillibility because nature loves a good slaughtering of the lambs. It’s not even that nature is simply red in tooth and claw, nature is Elizabeth Báthory.
The big problems with a market are similar to the big problems with cars, they tend to get into trouble when the driver is distracted, complacent, asleep or drunk. Right now the Central Banks are Johnny on the Spot when it comes to giving the global market its oft-needed liquidity enemas.