Yesterday, the S&P 500 hit a new all-time high.
And the Dow is now less than 100 points below its record close.
If you haven’t sold yet, dear reader, this may be one of the best times ever to do so.
Writing on the wall
Markets are contrary, pernicious, and downright untrustworthy.
Just when the mob begins to bawl most loudly for stocks…the market sets its trap.
Longtime Diary sufferers will be quick to straighten out the record. We’ve warned that stocks have reached a peak several times over the last four years.
Each time, we thought we saw the writing on the wall…and each time, we were mistaken. We raised our Crash Alert flag.
But the poor ol’ Black and Blue just fluttered in the wind, as stock prices rose ever higher. Eventually, it became so tattered that we took pity on it, folded it up, and put it away.
In the interest of full disclosure, as well as reputation hygiene, we saw a bear market coming in 1999 and 2007, too.
We were right then.
But lately, we’ve either been dead wrong…or dead early.
Zombies versus cronies
Which just goes to show what a four-flusher Mr Market can be…
He (helped by the Fed’s EZ money policies…and the Greenspan-Bernanke-Yellen ‘put’) has driven prices higher and higher…even as the global economy slows down.
And we’re not talking about a regular, unimportant slowdown. We’re talking about a slowdown of a special variety — one caused by deep trends that cannot be easily reversed.
For one, most of the major economies face a demographic challenge. They have more old people to support and fewer young people to support them.
Then there’s the problem posed by the zombie-crony complex. New readers may not have heard of the ZCC, so we will explain.
‘Zombie’ is a generic term we use to describe people who live at other people’s expense.
People who get food stamps, people who push papers for the government, people who collect ‘disability’ or medical/pension benefits beyond what their contributions would justify — all are zombies.
In today’s world, there’s a zombie on every street corner.
As former Republican presidential hopeful Mitt Romney was famously overheard saying, almost half the population has been zombified. And as he discovered, there’s no point in trying to win a national election by running against zombies: They vote.
You don’t want to run against the cronies either; they have the money!
Nowadays, it’s a little mixed up. But in the old days you could rely on the zombies to vote for Democrats. They lived in the Maryland suburbs of Washington; the cronies lived in the Virginia suburbs.
Today, you cut someone off in heavy traffic on the Washington Beltway, and you don’t know who is giving you the finger — a crony or a zombie.
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In the media, you hear a lot about the fight between them — red states versus blue states…Dems versus the GOP…Hillary versus ‘The Donald.’ But it is largely a mock battle, designed to give the impression that there is something really at stake.
Who will rule the country? What direction will it take? It depends on which group wins the election, doesn’t it?
What is really going on is a bipartisan collusion to transfer the nation’s wealth from the people who earned it to the zombies and cronies.
The zombies get a few handouts…crumbs under the insiders’ tables — as their payoff for not causing trouble. Meanwhile, the cronies make deals among themselves for the real money.
One gets a subsidy for growing sugar. Another is able to force people to buy health insurance (whether they want it or not). Another sells the Pentagon a fighter jet that not even the generals want.
You can find zombies in every McDonald’s in America. But go to dinner at Assaggi Osteria in McLean, Virginia, and you will dine with cronies.
Cronies get favours from the government by pretending to offer some useful service. Like running a prison. Or building weapons. Or developing a website for education bureaucrats.
There are fewer cronies than zombies, but the cronies have more money.
They buy influence with political contributions…job opportunities…speaking fees. Retired generals used to ‘fade away,’ as General MacArthur put it. No more. Now, they become cronies, lobbying Congress for more military hardware…and more money.
Together, the cronies (elected and unelected) and the zombies form a permanent ‘shadow government’ that, for ease of identification, we call the Deep State.
Den of foxes
This description of our government is so at odds with what we learn in school about ‘checks and balances’ and democracy in action that we are reluctant to believe it.
It sounds like a dark conspiracy bred in the hottest fires of Hell.
But there’s nothing surprising or clandestine about it. There are always people who figure out how to game the system. They play the angles. They understand how it really works.
Vilfredo Pareto, the great Italian economist, called them ‘foxes’.
No matter whether you think you have an absolute monarch or a constitutional republic, the foxes eventually capture the real power…and then wield it.
During the reign of Louis XIV, the foxes gathered around Versailles like moths around a flame. They were excused from taxes. They got to collect tolls and import fees. They found hundreds of ways to make the system work for them.
Now, you find these people in the Washington, DC, suburbs and a few enclaves of high-income cronyism, such as Lower Manhattan.
The den of foxes known as Wall Street deserves special attention.
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