A Strong Market Rebound
BALTIMORE – Wow! Stocks flew up on Tuesday. The Dow was up more than 350 points – or more than 2%. What’s behind it? Is it the beginning of a real comeback? Is the market telling us that Janet Yellen was right after all?
The stock market rebound continues – and is approaching resistance. As we noted in this pages last Friday: “[W]e believe that the current market rebound could easily go further. Not only are there a number of historical patterns which suggest that market weakness in January is usually followed by a multi-week recovery, but the current positioning and sentiment backdrop also indicates that stocks should manage to trade firmer for a while.” – click to enlarge.
Maybe the economy really is stronger than we think. At the start of the year, it looked as though the stock market was signaling trouble ahead. Over the last 50 years, every time U.S. stocks have gone down by 15% or more, there was about a 60% chance of recession.
We thought we saw recession coming anyway; the stock market seemed to confirm it. But who knows? We’ll wait to find out.
In the meantime, we take a look at the rise of the Deep State… the “shadow government” that really calls the shots.
The Chosen People
After China’s leader Deng Xiaoping announced that to get rich was “glorious”… the Berlin Wall fell… and political scientist Francis Fukuyama proclaimed the “end of history,” Americans naively believed that the world was evolving in the same direction – toward us.
Francis Fukuyama once wrote a book proclaiming “the end of history” – history promptly decided to continue.
Photo credit: AFP / Getty Images
We were the Chosen People… the exceptional country… the nation the rest of the world looked up to, aspired to be, and couldn’t live without. For example, we had little doubt that it was just a matter of time before China – in the relentless grip of globalized capitalism… and infested with graduates from Wharton and Harvard Business School – would surely become more like the U.S.
Soon, the Chinese would be watching inane TV shows, too. There would be eight-lane highways connecting major cities… and billboards advertising ambulance-chasing shyster lawyers. There would be McMansions… bought with 110% loan-to-value mortgages… and Chicken McNuggets on every street corner.
Auto loans, student loans, and payday loans wouldn’t be far behind. And corporate chiefs would brazenly manipulate the market to give themselves undeserved bonuses… using unreal money borrowed at unreal rates from unscrupulous bankers.
The Chinese would certainly soon develop a confident Fourth Estate too – a free press that would dig the dirt on the politicians and bureaucrats… and then quietly sweep it back under the carpet. And democracy?
The flame under the pot of liberty was burning in China as in America. It would be only a matter of time before it bubbled up into elections… with fatuous candidates, pledging more and more of other peoples’ money… until the voters were completely cooked.
But what a shock! Instead of the Chinese becoming more like us, we’re becoming more like them. And here, we focus on the one critical aspect: They have the Communist Party running the show. We have the Deep State in command.
People always want to get wealth and power in the easiest possible way. And the easiest way is to take it from other people. That is the role of government – the only institution that can steal and kill legally (it’s amazing what you can get away with when you make the laws!).
The gun smoke of the American and French Revolutions obscured this brutal reality. They showed that you really can fool most of the people most of the time. Just convince the plain people that they can play a role in government. Not only will they stand in line at polling stations before dawn… as they did in Virginia yesterday during the Super Tuesday presidential primaries.
Also, they will send their sons to die in your wars… and pay more tax, believing it is for their own good! Germany’s first chancellor, Otto von Bismarck, explained how to keep the little people in line: Promise to take care of them from cradle to grave. You tax them… then give back some of their tax money in the form of social welfare programs.
Otto von Bismarck – advisor to several Prussian / German rulers, the man who united Germany and promptly invented the welfare state.
A New Power
Until the 19th century, the main source of wealth was land. In Europe, it was owned by a few rich “rentiers” and farmed by many poor farmers. But after the farmers got the vote, the big landowners found themselves at a political disadvantage. They didn’t have enough votes to protect their wealth at the ballot box. And they didn’t have enough wealth to protect it in the back corridors and smoke-filled rooms behind them.
A new power and new wealth was rising in cities and factories. “Unearned wealth” or unfair “rents” couldn’t keep up. It got a bad reputation. The new thing was “free enterprise.” And it was making society rich.
The advent of manufacturing – mass-production for the masses – changed everything
Image via Wikimedia Commons
This was a different kind of wealth. It came from work, skill, and investment. You had to earn it. The new rich were adding new wealth. They weren’t just taking wealth away from the laboring masses. The old rich – rattling around in their big, unheated piles, with holes in their sweaters and zeros in their bank accounts – added nothing.
The landowners lost power. Gradually, the big estates – many of which could be traced to larcenies and conquests from the medieval era – were broken up and taxed away. And for a while – when it was fresh and new – democracy seemed to work. The “dead hand” of the past fell away. The old rentiers were left behind.
But government was still in business. Smart people soon discovered how to use it…and a new class of rentier arose…
More to come.
Chart by: StockCharts
Chart and image captions by PT
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
2 Responses to “Why Super Tuesday Voters Were Wasting Their Time…”
Most read in the last 20 days:
- Gold Sector Update – What Stance is Appropriate?
The Technical Picture - a Comparison of Antecedents We wanted to post an update to our late December post on the gold sector for some time now (see “Gold – Ready to Spring Another Surprise?” for the details). Perhaps it was a good thing that some time has passed, as the current juncture seems particularly interesting. We received quite a few mails from friends and readers recently, expressing concern about the inability of gold stocks to lead, or even confirm strength in gold of...
- Don’t Blame Trump When the World Ends
Alien Economics There was, indeed, a time when clear thinking and lucid communication via the written word were held in high regard. As far as we can tell, this wonderful epoch concluded in 1936. Everything since has been tortured with varying degrees of gobbledygook. One should probably not be overly surprised that the abominable statist rag Time Magazine is fulsomely praising Keynes' nigh unreadable tome. We too suspect that this book has actually lowered the planet-wide IQ –...
- Incrementum Advisory Board Meeting, Q1 2017 and Some Additional Reflections
Looming Currency and Liquidity Problems The quarterly meeting of the Incrementum Advisory Board was held on January 11, approximately one month ago. A download link to a PDF document containing the full transcript including charts an be found at the end of this post. As always, a broad range of topics was discussed; although some time has passed since the meeting, all these issues remain relevant. Our comments below are taking developments that have taken place since then into...
- What is the Best Time to Buy Stocks?
Chasing Entry Points Something similar to the following has probably happened to you at some point: you want to buy a stock on a certain day and in order to time your entry, you start watching how it trades. Alas, the price rises and rises, and your patience begins to wear thin. Shouldn't a correction set in soon and provide you with a more favorable buying opportunity? Apple-Spotting – a five minute intraday chart showing the action in AAPL on February 1, 2017 - an...
- Trump and the Draining of the Swamp
Swamp Critters BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp. What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best...
- Gold and Silver Divergence – Precious Metals Supply and Demand
Gold and Silver Divergence – Precious Metals Supply and Demand Last week, the prices of the metals went up, with the gold price rising every day and the silver price stalling out after rising 42 cents on Tuesday. The gold-silver ratio went up a bit this week, an unusual occurrence when prices are rising. Everyone knows that the price of silver is supposed to outperform — the way Pavlov’s Dogs know that food comes after the bell. Speculators usually make it...
- When Trumponomics Meets Abenomics
Thirty Year Retread What will President Trump and Japanese Prime Minister Shinzo Abe talk about when they meet later today? Will they gab about what fishing holes the big belly bass are biting at? Will they share insider secrets on what watering holes are serving up the stiffest drinks? [ed. note: when we edited this article for Acting Man, the meeting was already underway] Japan's prime minister Shinzo Abe, a dyed-in-the-wool Keynesian and militarist, meets America's...
- The Great Wailing
Regret and Suffering BALTIMORE – Victoribus spolia... So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment. Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations. Oh no! Alaric the Visigoth is here! Hide the women and children! And don't forget the vestal virgins, if you can find any... You’d think Washington had been invaded by Goths, now...
- Receive a One Percent Gift When Buying or Selling a Home
How to Save Money When Buying or Make More When Selling a Home In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine. Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell. The people who took this photograph probably want to...
- Silver Futures Market Assistance – Precious Metals Supply and Demand
Silver Is Pushed Up Again This week, the prices of the metals moved up on Monday. Then the gold price went sideways for the rest of the week, but the silver price jumped on Friday. Taking off for real or not? Photo credit: NASA Is this the rocket ship to $50? Will Trump’s stimulus plan push up the price of silver? Or just push silver speculators to push up the price, at their own expense, again? This will again be a brief Report this week, as we are busy...
- Unleashing Wall Street
To Unleash or Not to Unleash, That is the Question... LOVINGSTON, VIRGINIA – Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014. Why should stocks be so expensive? Example of something that one should better not unleash. The probability that a win-lose proposition will develop upon meeting it seems high. It wins, because it gets to eat... Image credit: Urs Hagen Oh,...
- Boondoggles for the Swamp Critters
Monster or Mozart? BALTIMORE – Investors seem to be holding their breath, like a man hiding a cigarette from his wife. It’s just a feeling, and it’s not the first time we’ve had it... but it feels as though it wouldn’t take much to send them all running. Actually, they're not going anywhere yet... but there is a lot of overconfidence by those who were very worried when prices were a lot better - click to enlarge. Meanwhile... we’re coming to a deep...