By MN Gordon
Actions and Reactions
Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it. Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all. We’d rather get our teeth drilled by a dentist. Still, a rapid selloff has many positive qualities.
Memorable moments from the annals of dentistry [PT]
For example, the days following a market correction are full of restoration and redemption. Like the prayer of Saint Francis of Assisi, Tuesday’s 567 point DJIA bounce brought hope where there was despair, light where there was darkness, and joy where there was sadness. President Trump even acknowledged that his powers over the stock market are less than omnipotent.
From a practical standpoint, a market correction clarifies that we live in a world that is exacting and just, as opposed to a fabricated fantasy. A stock market purge demonstrates that the central planners haven’t entirely broken the markets just yet. Markets still go both up and down. This important detail is always forgotten at the worst possible time.
The stock market purge also clarifies that Fed actions provoke reactions. The Fed’s rate raising and quantitative tightening efforts are having an effect. After pumping stock and credit markets up for the last decade they are now, by design, deflating them. What a delicate and unnecessary game these central bankers play.
The tree month t-bill yield and total assets held by the Federal Reserve system – moving in opposite directions. Amazingly, many market participants seem to believe that when these data change direction, the stock market will remain unaffected. That is probably wishful thinking. [PT]
Sick Markets
Central planners relentlessly endeavor to control the future and improve upon it before it even comes into existence. But how do they know what an improved future would be? Is it one with higher stock prices? Is it one with a lower rate of unemployment? Moreover, how do they know how to bring it to fruition?
The sweat off a central banker’s brow is for the purpose of making the future predictably bland for their member banks. So they can mint money by borrowing short and lending long without fail. Attempting to tame credit markets is one way they strive to achieve this. These efforts are futile and destructive.
Perhaps they can push out the growth phase of the business cycle. But, in so doing, they encourage layers upon layers of bad decisions, including massive debt based malinvestment, to stack up across the landscape until the world is greatly at odds with itself.
They can’t accept that the future is always veiled with uncertainty. No one really knows what tomorrow will bring. This is a universal fact of humanity. Attempting to control the future in ways that are against its natural tendencies will lead to market distortions and lopsided economies.
The story of this nine-year bull market is a story …read more
Source:: Acting Man
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