Forbes Polls the Wackosphere and Gets An Earful
by Lee Adler
http://wallstreetexaminer.com/2009/08/31/forbes-polls-the-wackosphere-and-gets-an-earful/">The Wall Street ExaminerThe editors of Forbes have asked me to give them my economic forecast for the next year (cough, cough, guffaw). Don’t be impressed. They sent the same email to the whole financial wackosphere. I assume that their purpose, as with the entire financial infomercial media, is to poke fun at us wackos so as to minimize their own horrendous shortcomings as financial journalists.
OK, so I’ll give them an answer since they were nice enough to ask. But let me preface this for those of you who don’t know me by saying that I’m not an economist, thank goodness. What an embarrassment that would be. My educational background is in accounting (undergrad) and psychology (grad ). My professional career over the past 22 years has been spent mostly in real estate and financial market analytics. So I’ve had some exposure to the real economy and the financial economy.
I’ve had a particular interest throughout my life in manias and their aftermath. I’m a self taught technical analyst (aren’t we all), having first become interested in the art of TA at the ripe old age of 13 when I was introduced to point and figure charting. What I have learned about liquidity analysis, an area in which I specialize, has been through independent research, observation and study. My ideas are not polluted by the shibboleths of formal education. My interest in manias brought me back to my current job as an independent self-employed professional analyst and web publisher in 2000 when I founded Capitalstool.com. I founded The Wall Street Examiner in 2004.
In my late 20s I worked for several years as a sell side technical analyst for a couple of institutional boutique firms on Wall Street. Let’s just say that the Street and I did not mix.
I had morals.
While working on the Street in the early 1980s, thanks to reading people like Joe Granville, Richard Ney (The Wall Street Jungle), and Charles Mackay (Extraordinary Popular Delusions, etc.) I realized that the financial media was nothing more than the marketing arm of the Wall Street retail distribution network. Wall Street’s job is to distribute paper and transfer wealth from the many to the few, including, most importantly, itself. The media’s job is to transmit the sales pitch.
The financial infomercial media plays a crucial and integral role in that system, providing a platform for Wall Street’s professional shills to reach the masses. It is the greatest manipulative system in the world since Goebbels, mastering the art of repeating the Big Lie to perfection. When a shill comes on CNBC and says buy XYZ, his in house traders are the ones doing the selling.
One of the Big Lies is that the stock market discounts the future. We’ve had a big rally, so the economy must be about to get a lot better, so the story goes. But the truth is that the stock market is nothing more than a liquidity meter. It measures a very particular type of liquidity. It mostly measures how much cash is burning a hole in the pockets of the dealer community.
Right now, thanks to the Fed, the dealer community, particularly the Fed’s Primary Dealers who dominate not only the Treasury market but the stock market as well, are rolling in oceans of cash, pumped directly to them by the Fed. They are using most of it to pay down debt by selling much of their questionable assets to the Fed, particularly mortgage debt and corporate debt, but they are using some of it to manipulate stocks higher. They do that because, one, it’s easy for them to do it, and two, because it’s much easier to get the suckers, oops, I mean the buy side institutions, to take the other side of the trade when prices are rising.
So as long as the Fed pumps this cash to them, stock prices will go up. It has nothing to do with the economy. It has nothing to do with discounting the future. The idea that stock prices discount the future is ridiculous. Stock markets are comprised of people, or at least the people who wrote the computer programs that do most of the millisecond trading that dominates price action. People, by and large, are not very good at predicting the future. That’s especially true of economists, pundits, and most of all, portfolio managers, whose only real interest is in not doing anything different than what the majority of portfolio managers are doing. How in the world can a portfolio manager properly manage money when one of the mandates of the industry is to stay fully invested. The best they can hope for is to do better than their peers. They can do nothing to protect your assets in the event of systemic collapse, such as we are now facing.
In continuing to spread the lies this time around, the media helps to insure that for the foreseeable future there will be no recovery from this economic and financial mess. The media continues to feature the same people telling the same idiotic stories, pursuing the same tried and true practices of distributing insider stock, especially their own, at high prices to the masses. The cash goes right from our pockets to the pockets of the financiers, with the media getting a huge cut in the process. They are co conspirators in a massive criminal scheme, some of it legal, some of it not, to separate people from their money.
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