{"id":1178568,"date":"2020-04-15T09:16:14","date_gmt":"2020-04-15T14:16:14","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=109266"},"modified":"2020-04-15T09:16:14","modified_gmt":"2020-04-15T14:16:14","slug":"investing-is-now-simple","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1178568","title":{"rendered":"Investing Is Now Simple"},"content":{"rendered":"

This post Investing Is Now Simple<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

The raging pandemic has served one high and worthy purpose:<\/p>\n

It has made obvious \u2014 to all with open eyes \u2014 that the stock market is a crook\u2019s game, a vast swindle.<\/p>\n

How else could the stock market regain so many of its initial pandemic losses\u2026 while 16 million Americans file unemployment claims\u2026 and second-quarter GDP may contract 40%?<\/p>\n

The Federal Reserve has expanded its balance sheet some $1.6 trillion these past four weeks.<\/p>\n

There is your answer.<\/p>\n

All vestiges of fair and honest markets have gone whooshing down the chute.<\/p>\n

A Tremendous Gambling Racket<\/b><\/h2>\n

The Federal Reserve heads a tremendous gambling racket. It deals dishonest cards. It weights the dice. It tinkers the slots.<\/p>\n

Anything and everything it will do to rook bears out of their rightful jackpots.<\/p>\n

And so we ask:<\/p>\n

Where would the stock market presently sit without the Federal Reserve\u2019s massive fixing?<\/p>\n

The numbers men at One River Asset Management have tackled the question.<\/p>\n

Their conclusion shortly.<\/p>\n

First we look in on the blackjack table\u2026<\/p>\n

A Touch of Reality<\/b><\/h2>\n

The Dow Jones shed 445 points today. The S&P gave back 62; the Nasdaq, 122.<\/p>\n

Why today\u2019s setback?<\/p>\n

We learn this morning that March retail sales plunged a savage 8.7% \u2014 a record jolt to business. No previous figure approaches it.<\/p>\n

We further learn that United States industrial production plunged 5.4% month over month.<\/p>\n

That represents its steepest monthly fall since January 1946\u2026 not long after the nation began beating its belligerent swords into peaceful plowshares.<\/p>\n

Meantime, earnings season is once again upon us. And corporate earnings are presently dropping away…<\/p>\n

Bank of America claims first-quarter profits plummeted 45%. Citigroup profits went 46% backward. Goldman Sachs also reported a violent 46% retreat.<\/p>\n

Quincy Krosby \u2014 Prudential Financial\u2019s chief market strategist \u2014 drips icy sweat as he canvasses the numbers:<\/p>\n

\n

If this is a precursor to what we can expect throughout the U.S.\u2026 there\u2019s no word for it. This reflects the complete shutdown of the economy.<\/i><\/p>\n<\/blockquote>\n

Yes it does. Yet the abysmal numbers were all but guaranteed. And still the stock market jumped for weeks.<\/p>\n

Yes, the market was down today.<\/p>\n

Yet we suspect further pledges of Federal Reserve trickery will coax stocks up again \u2014 for a time at least.<\/p>\n

The New Investment Strategy<\/b><\/h2>\n

BlackRock is the largest asset manager on Earth. It is also in command of the Federal Reserve\u2019s asset-purchasing program.<\/p>\n

This is the program that is lifting creaky debt off corporate balance sheets\u2026 and dropping it into taxpayers\u2019 laps.<\/p>\n

And what is BlackRock\u2019s present investment strategy?<\/p>\n

To simply hitch its cart to whichever assert the Federal Reserve purchases. Explains Mr. Rick Rieder, director of BlackRock\u2019s global allocation unit:<\/p>\n

\n

We will follow the Fed and other [developed market] central banks by purchasing what they\u2019re purchasing, and assets that rhyme with those.<\/i><\/p>\n<\/blockquote>\n

That is, the central banks will ultimately select BlackRock\u2019s investments. What kind of capitalism is this?<\/p>\n

And is there not something uniquely swinish about this arrangement\u2026 perhaps even unlawful?<\/p>\n

BlackRock is directly involved in the Federal Reserve\u2019s asset purchases. It therefore knows which assets will get a lift. It can place its wagers accordingly \u2014 before all others.<\/p>\n

Where is the Securities and Exchange Commission to investigate insider trading?<\/p>\n

Ecstatic Markets<\/b><\/h2>\n

But markets are \u201cecstatic,\u201d says Rabobank’s Michael Every.<\/p>\n

That is because they need only lean back on their oars… and drift with the Federal Reserve\u2019s gravitational tide:<\/p>\n

\n

Markets are ecstatic because there is no need to actually do any thinking at the moment. The Fed has made clear that there are to be no losers \u2014 or at least that one does not have to bother trying to pick the winners.<\/i><\/p>\n<\/blockquote>\n

And so the Federal Reserve has quieted capitalism\u2019s mighty gales of creative destruction. These are the gusts that push progress along, that push society along.<\/p>\n

They blow away the inept and inefficient\u2026 and sweep in the new and improved.<\/p>\n

Improved mousetraps, superior widgets, better living \u2014 these come out of capitalism\u2019s destructively creative gales.<\/p>\n

But the Federal Reserve has hushed them down.<\/p>\n

Each Intervention Adds More Unproductive Debt<\/b><\/h2>\n

Each intervention piles up additional debt within the system. Thus the system sags under the added weight.<\/p>\n

Progress slows as the laggards absorb capital that could have flowed into worthier hands. Yet the inefficient know they will not sink under. They realize the authorities will keep them up.<\/p>\n

Deutsche Bank strategist Jim Reid:<\/p>\n

\n

The authorities have been so reluctant to see the creative destruction that\u2019s so important to successful capitalism that they had to make another stunning major intervention.<\/i><\/p>\n

Ever since the Fed of the late 1990s decided to bail out the financial system post the Long Term Capital Management collapse, we\u2019ve had rolling state-sponsored capitalism and large moral hazard. This has meant that each subsequent default cycle (or mini market cycle) has been less severe than the free-market parallel-universe version would have been and has left increasingly more debt in the system as a result and meant that the intervention necessary to protect the system has got greater and greater. In my opinion, it also helps lock in lower productivity as you keep more low\/no growth entities alive.<\/i><\/p>\n<\/blockquote>\n

This fellow cites productivity. Productivity is the source of authentic long-term prosperity\u2026<\/p>\n

No Productivity, No Growth<\/b><\/h2>\n

Productivity growth averaged 4\u20136% for the 30 years after WWII. But average productivity has languished between 0\u20132% since 1980.<\/p>\n

Meantime, labor productivity averaged 3.2% annual growth from World War II through the end of the 20th century. But since 2011?<\/p>\n

A mere 0.7%.<\/p>\n

The United States government borrowed perhaps $12 trillion since the financial crisis \u2014 even before the latest debt delirium.<\/p>\n

But the American economy expanded only $5.1 trillion over the same space.<\/p>\n

That is, GDP increased 35%. But the national debt increased 122%.<\/p>\n

Where Will Productivity Originate?<\/b><\/h2>\n

We presently confront spiraling debt\u2026 and diminishing growth. The unfolding cataclysm will only deepen the trend.<\/p>\n

Concludes Michael Lebowitz of Real Inve\u200cstment Advice:<\/p>\n

\u201cGiven the finite ability to service debt outstanding\u2026 future economic growth, if we are to have it, will need to be based largely on gains in productivity.\u201d<\/p>\n

If we only knew the source of that productivity.<\/p>\n

But we conclude by returning to our question of the day:<\/p>\n

Where would the stock market presently sit without the Federal Reserve\u2019s mammoth manipulations?<\/p>\n

One River Asset Management has taken up the question. Here is their answer:<\/p>\n

Down 50\u201380%…<\/p>\n

Regards,<\/p>\n

Brian Maher
\nManaging editor, The Daily Reckoning<\/i><\/p>\n

The post Investing Is Now Simple<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post Investing Is Now Simple<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

The one benefit of the COVID-19 pandemic… Investing is now simple…<\/p>\n

The post Investing Is Now Simple<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[3884,3724,366,818,4074,462,463],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1178568"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1178568"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1178568\/revisions"}],"predecessor-version":[{"id":1178569,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1178568\/revisions\/1178569"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1178568"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1178568"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1178568"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}