As we get ready to kickoff the final day of trading in April, one of the greats in the business says that “psychology is even more disconnected now than it was in late 1999 to 2000.”
Rage Against The Idiots
By Bill Fleckenstein President Of Fleckenstein Capital
April 29 (King World News) – It’s time to rage against the unelected idiots who have taken over the world, literally. By that I mean the central bankers who are, in fact, central planners (think the Politburo). They have “planned” to achieve certain outcomes, such as just the right amount of inflation, in the current case 2% (regardless of the fact that inflation rate is calculated in a way that suppresses actual price hikes), and they want “full employment.” Their attempt to achieve these targets has literally warped everything.
From Level Playing Field to Insane Playground
In the old days central bankers worried about “sound money.” That was their only goal. It seems quaint, but it worked drastically better than what they’re doing now (which has been an epic failure). They made sure the money was sound, and capitalism took care of itself, here in the U.S. and other places.
Now, with their ridiculous money printing and negative interest rates, they have created a situation where we have an immense bifurcation of wealth and capitalism itself is being questioned, though we’re not experiencing the real thing any more. Instead we have a bastardized version of crony capitalism that I call “centrally planned capitalism,” which has a lot of the same problems that communism and socialism do.
By that I mean there is an elite, moneyed class with a tremendous concentration of wealth and power, while the vast majority of people have practically nothing, just as those in the inner circles of power in socialist and communist regimes had everything they wanted (at least compared to the average person), while everyone else struggled…
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Central bankers have in effect made money worthless and caused bond markets to be priced nonsensically. Their policies have gotten us to a point where we have civil strife here in the U.S. and other countries as well. Socialism is rearing its ugly head because people are so angry at the inequality and they are blaming capitalism.
The point of my rant, however, is to lay blame where it belongs, that being with these unelected financial policymakers who over the course of the last 25 years have slowly ratcheted up the takeover of everything. Greenspan was an idiot, he created a bubble, he and Bernanke tried to bail that out with easy money that caused the housing and credit bubble. That nearly wiped out the financial system, partially because the Fed didn’t regulate the investment banks like they were supposed to, after Greenspan helped get Glass-Steagall abolished.
Out of Left, and Right, Field
The policies instituted here and elsewhere from roughly 2010 to 2012, and which are in place now, have created bond markets that make no sense, equity markets that no longer function as such, as they’re basically just playgrounds for algorithms and those who believe in the central banks. Meanwhile the enormous frustration of the poor and middle-class has given us politicians like Donald Trump and Ocasio-Cortez, just to pick two extreme examples.
In sum, capitalism hasn’t failed, the central bankers have failed. They have hijacked capitalism to the detriment of nearly everyone and they are going to continue to do what they do until the whole thing blows up. When that will be, I don’t know, but eventually they will be seen as the reckless and irresponsible entities that they are.
I’m not saying individuals at the central banks set out to be, or are, inherently evil. Rather, for some reason, they are too blind to see the problems they have created and they just continue to make them worse. I hope sooner rather than later enough markets blow up in a way that their credibility is finally called into question.
I suspect I will have more to say about this topic prospectively, as I’ve been giving it more thought after seeing stories about what’s wrong with capitalism, along with the other looney headlines about the “ending of inflation,” “can this bull market go on forever,” and similarly crazy ideas that have come about because we’ve been living in the twilight zone for the last decade, thanks to the unelected fools I’ve just ranted about…
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Turning to the action, the indices were modestly higher through midday, as bullish bravado basically trumps all else. Just to show how brazen and careless people are, ON Semiconductor decided to pre-release its earnings on Saturday (something I have never seen before). It was able to make the (previously lowered) number but had to lower guidance (it is another chip maker that has been discussing a second-half recovery without any data).
Last quarter ON wanted everyone to believe business was about to get better, which it didn’t. Based on its end markets, it’s not likely there will be a second-half boom. However, despite the Saturday preannouncement, early on the stock rallied about 4% today before reality set in and caused it to fall 1%.
I know this is just one example, but I used to think it was bad when occasionally a company would report news late Friday night, and I’ve only seen that a couple of times. Larry Ellison comes to mind, of course, although that was recently trumped by Facebook’s filing after markets closed on Good Friday.
Losing Their Minds
It seems to me that psychology is even more disconnected now than it was in late 1999 to 2000. The only time I’ve seen such incredibly rabid madness and disregard of the things that matter to companies was 1989 in Tokyo, a scene I was pretty sure I would never see repeated. For the most part, valuations aren’t that absurd, but the mindset is just about as brazen. Back then, in order to understand the market you needed to be a “shinseiji,” literally a newborn human, because if you had prior experience you couldn’t make any sense of it (or profit). Not that any of that matters, because the only thing that does is when something cracks the current psychology and a freefall ensues on the downside, but that is not today’s business.
Turning back to the action, in the afternoon not much happened and the market closed with the modest gains you see in the box scores.
Away from stocks, green paper was mixed, fixed income was weaker, as were the metals, with gold losing 0.5% to silver’s 1%. The miners were heavier as well, with Newmont declining for the 10th day in a row and the 13th time in the last 14 sessions. That’s a pretty impressive string to the downside, and I can’t tell you why that company has been under so much pressure. Basically, it completed its merger with Goldcorp and the combined entity has sunk like a stone.
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