Why the Stock Market is Swinging so Wildly

I didn’t used to be interested in economics, they were confusing and complicated. But I grew up in a family where money and economics were part of the everyday conversation. My dad was in the Navy, and so we also spent a lot of time around boats, beaches, the ocean, and sailing. I also learned to sail when I was a kid, and as a teen, got to take the boat out on a regular basis. One of the scariest things to experience is being in a small boat caught in a storm. And part of that fear comes from the dangers of what’s called following waves.

Following waves are the ones that are behind you, moving in the same direction as you’re sailing. The waves usually are traveling faster than the boat, and if those waves get big enough, they cause all sorts of contortions in your movements. They can catch the back corner of the boat and swing it wildly to the left. Then the next wave catches the other corner and just as quickly slams the boat to the right. Back and forth, faster and faster, until a big wave slams the boat sideways to the waves. Then you capsize.

Another big danger of following waves — meaning waves that are behind you, following you as you sail — is that they can cause the boat to turn into a surfboard. If the waves are large enough, they literally pick the whole boat up and carry it forward as fast as the wave is traveling. That means you have no steering, no control, no rudder, and your engine (or sails) mean nothing anymore.

The Financial Markets Pushed by Stimulus Money

Take a look at this little patrol boat trying to handle big following waves. Some might think it’s kind of fun being a surfboard in the middle of the ocean. But take another look at the front (bow) of the boat. If the wave behind it lifst the stern (back) strongly enough, the tip of the bow will go under water. At that point, the force of the wave takes the entire boat and cartwheels it head-over-heel (stern-over-bow) across the ocean, like a pinwheel!

Or, more simply, the bow goes under and the entire force of the ocean just slams it down into the bottom of the ocean.

Think of this patrol boat as the stock market and financial markets. The waves behind it are the free money coming from the Federal Reserve. Stimulus money is a massive wall of water, much like the ocean. It’s almost unlimited and means nothing other than water. There’s no actual value behind all this stimulus money, it’s simply fiat money being created by borrowing against an unlimited check book.

Now imagine how this boat is being slammed around by those waves. It pitches up and down wildly, and swings (yaws) back and forth like a car on solid ice. The boat has no traction because it’s on the water. The car has no traction because it’s on ice. Basically, the same thing excepting that the boat has a strong force behind it. The car only has its momentum and speed when it hits the ice. The Federal Reserve stimulus money is like BOTH a snowstorm, and putting the car of the markets on a steep hill.

In this particular picture, the waves are large enough that they could slam the boat into the bottom, bow first. If the engines on the boat are powerful enough, they might outrun the waves. A better solution would be a “sea anchor.” This is a long rope with a heavy bag that’s let out behind the boat. It serves to slow the boat down, allowing the waves to go under the boat and lift it up without turning it into a surfboard. The danger is that a large wave and slow boat might mean the wave swamps the boat, covering the entire thing from the back to front.

The first step is to get out of the storm. But if you’re in the middle of the ocean, that’s not an option. The next step is to throw out a sea anchor and slow the boat down. Another option is that a boat usually does way better when it faces waves head-on, as the front of the boat offers a much smaller target for the waves. However; turning the boat around in a storm means offering the side of the boat to the waves. They would just roll the boat over.

If you’re in a car traveling at 5 miles an hour when you hit ice, you start to skid. The back of the car begins to swing left and right, but at least there aren’t any waves rushing at the back of the car. Eventually, you reach a tipping point and the back of the car swings out of control. The car goes into a spin, loses control, and only stops when it hits something or gets off the ice.

Hitting a wall at 5mph is one thing. But if you were driving at 60mph when you went into the skid, hitting the wall is an entirely different problem. So too, the size of the waves behind this boat introduce pressure, force, and speed to the situation.

We’re facing a blizzard of economic problems around the world. Using the same logic as the newscasters, we should be shouting at the Federal Reserve, the SEC, the Obama Administration, Congress, and all the regulatory agencies standing on the sidelines: “Slow it down!”

We could potentially get out of this storm by refusing to allow the Federal Reserve to pour liquidity (money) into the markets. That would go exactly opposite to Keynesian economics, so it likely won’t happen. Or, we could put a drag on the markets, introducing some sort of actual and meaningful regulation in terms of how Fed money is used.

Right now, the more money the Feds throw into the system, the more banks are using it to speculate on wild-ass trades. And that’s why we’re seeing massive swings, day to day in the overall financial markets. Huge banks with billions of dollars in Federal Reserve stimulus money are pouring it into the markets. That’s creating larger and larger waves, faster and faster trades.

Can these waves eventually overwhelm the entire financial system? Are banking and institutional traders larger than the entire stock market? Many people in the past would have said no, that’s not possible. And yet, we’re seeing it right in front of our very eyes. All you have to do is watch the drastic pitching and yawing of the DOW, S&P, bond markets, and gold prices.

Best solution is to either not be in the markets, standing on solid ground somewhere else; or, be sure to have a really really good life jacket on hand!

Choice Creates and Measures Freedom

What’s the definition of freedom? Seems like a simple thing, right? Many people have a general sense that freedom means being able to do whatever you feel like doing, or whatever you want to do. Is that freedom, though? I’m free to shoot someone in the head, right? If that’s what I feel like doing?

The conundrum seems to be the contrast between the freedom to do whatever I want to do, versus some kind of legal system that prevents me from doing bad things. What are bad things? Are there universally bad things? Is there an absolute good or bad? That’s where it starts to get tricky.

Is a prisoner “not free” because they’re behind bars? Or are they not free because they’ve been declared to be a prisoner? Is it the declaration of the law or the bars that remove someone’s freedom? What was removed? What does it mean to be “a prisoner of your own mind?”

One definition is that freedom is the ability to do whatever you want to do and not have to worry about how you’ll pay for it. It’s a pretty good definition, but what about societies that have no money? If we go back 50,000 years, before even barter systems, would we say that nobody was ever free because there wasn’t any money? Or do we say everyone was free because without money, nobody worried about paying for anything?

Then there’s the problem of money and owning money. Or owning people. Do we say that people are slaves because someone owns them? What if the slave-owner doesn’t have any money? Lots of people have been slaves and there wasn’t any discussion of price. One group is stronger than the other and has guns, whips, and chains. If you choose not to be a slave, you get killed.

Ah, and that’s where the concept of freedom begins to clarify. It’s in the word “choice.”

Look around you today. Many people don’t have jobs. Others have jobs, but they’re certainly not the jobs they would have chosen. In fact, more and more people are being thrown into poverty where they have fewer and fewer choices. Instead of a country where people have lots of choices, we have fewer choices.

When you go shopping, you see more and more of the same-old-same-old. That’s why people are shopping more online, because there are more choices. Tiny micro-businesses offer craft items, handmade items, or unusual and hard to find items. They aren’t international conglomerates offering cookie-cutter products…with no choice!

A man who owns another man, making the second man into a slave, only needs to remove all choice from that second man. The slave-owner doesn’t need money. Nor does he really needs guns. In whatever way, when one man removes choice of action from another, that creates slavery.

Consider the various new acts of congress under discussion. Do they offer more choices…or fewer choices? Who dictates the number of choices? When one central authority attempts to control choices, do we end up with more or fewer choices than free-market competition?

The conservative argument, nowadays called “extreme,” is that with less and less choice we have less and less freedom. But few people are defining freedom, and few people understand that it isn’t the loss of freedom that leads to less choice! It’s the loss of choice that, by definition means the loss of freedom!

Are you happy with your life right now? Many people are, but many more are not. How much choice do you have about what you’d like to change? How many options do you have as to what you’d rather be doing? Americans today are the first generation in a very long time with a lower standard of living than the previous generation. Did you choose that, or is the falling US dollar “forcing” you to deal with it?

When you have no choice but to go to work in order to pay your bills, then you no longer are free to act in whatever way you want to act. It’s not about whether or not you can pay for whatever it is you want to do! It’s about whether you can CHOOSE whatever it is you want to do!

That’s why we can clearly and unequivocally prove and demonstrate that no person truly can own another person. It’s because nobody can remove one’s choice to think or not to think. Excepting with drugs, lobotomies, and other damage to the human brain. However; with enough damage to control whether or not someone thinks, how much value remains in the human being controlled? Are they still human?

Another way to control someone’s mind is to present them with what appears to be a reality that doesn’t actually exist. Illusions can cause someone to think they’re choosing the correct action, when instead they’re being manipulated into acting according to whomever controls the illusion. That would be modern mind-control techniques, or “psy ops.”

All of that’s interesting and fun to discuss, but the bottom line is that we’re trying to define the word “freedom.” The concept of freedom, and the word itself, refers to a set of terms meaning “status” or “condition.” It’s a state of being. That’s the subsuming set, and we need only to find the unique identifier.

What’s unique about freedom? What separates it out from all other states of being? Choice.

Animals aren’t particularly free, in that they’re controlled by instincts. We don’t understand enough about living minds to know about animals for sure, but we currently tend to believe that most animal behavior is driven by low-level body conditions and/or instincts. An instinct is a biological motivator embedded in the cellular material, somewhat like a reflex. Even so, a dog does have some choice as to whether to bite or not bit, eat or not eat, piss or not piss.

Insofar as anything can make a choice on its own, that thing is free. Indeed, freedom is not an entity, nor is freedom an attribute. Freedom is a measure! Freedom measures the amount of choice relative to action. The more choice you have, the more freedom you have (or anything has). Choice requires a processing mind of some sort. We don’t say rocks are free. Freedom refers to living beings, and mankind has more choice opportunity than a squid.

The US Constitution, written by a group of philosophers, attempted to codify the principles of human freedom. The Declaration of Independence laid the foundation for intrinsic rights, granted by a Creator:

“We hold these Truths to be self-evident, that all Men are created equal, that they are endowed, by their CREATOR, with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness.–That to secure these Rights, Governments are instituted among Men, deriving their just Powers from the Consent of the Governed, that whenever any Form of Government becomes destructive of these Ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its Foundation on such Principles, and organizing its Powers in such Form, as to them shall seem most likely to effect their Safety and Happiness.”

The problem is that there wasn’t any definition of the word “rights.” Nor was there a definition of “happiness.” Indeed, the Founding Fathers held that God and Creator were the same concept, and purposefully did NOT hold anyone to a particular version of God. They did NOT specifically refer to a Christian God, or any other religion. America was particularly unique in that separation between the Church (religion) and the State was a fundamental aspect of the basic structure.

We all “assume” that the Declaration sets forth the argument in favor of freedom, and that the Constitution defines how the citizens of America will hold on to their freedom. But we don’t have the clear and absolute definition of exactly what is freedom. It’s the ability to choose and act upon those choices within a moral system, but primarily the ability to choose. To choose to affect reality around us.

Capitalism is the legal and moral system by which we retain the ownership of our chosen actions (if we choose to make something, build something, invent something, create something). “Ownership” is a legal right, granted within the structure of a legal system, and guaranteed through a contract.

A government has only a few basic reasons for existence. One of those reasons is to uphold and sustain contracts.

The ballot box and our right to vote is fundamentally about choosing our representative leadership. Freedom is the same thing as voting! It’s not that we have the right to vote, therefore we’re free. It’s that we are free, which means we MUST have the right to choose…to vote.

The US Constitution guarantees our right to choose. Capitalism produces the legal system by which we not only are responsible for our choices (and actions), but it’s the system of contracts that guarantee private ownership. The State has NO rights! The State is only granted authorities, and limited authorities at that. The State is NOT “free” to choose how “it” will or won’t act!

America was founded on the right of the individual to choose a social governance structure. That right to choose is what makes us free. We are not “granted” freedom! We simply ARE free! Free to choose! We have chosen to be constrained in our actions by a moral code, and presumably, a legal system that was supposed to agree with that moral code. Lately, we have less and less say in the matter…in ANY matter! Less and less choice, means we are less and less free.

Countdown to 4,000

Some people think there’s going to be a light at the end of the tunnel, soon, with respect to the financial markets. Last year the Dow-Jones Industrial Average (DOW) was at 13,941. Today (2/17/09), following the signing of the new stimulus package, it closed at 7,552.

Personally, I think all this is a historic cycle coming into action. The world, and certainly the American public, would have had to pay the piper, so to speak, for decades of over-spending, lack of saving, and disregard for reality. We haven’t. As such, I suspect we won’t see the end of this slide until we approach the 4,000 mark.

February 17, 2008 DOW
13,191

November 9, 2009
10,227

Loss: 22.5%

America is being held hostage by the Federal Reserve, banks and financial institutions, and corrupt politicians whose entire lives are devoted to the single goal of staying in office. Those politicians haven’t the slightest interest in the American public. They have zero interest in fixing anything, and would prefer to have high anxiety and fear running rampant. The more anxiety, the better their chances of re-election.

How long will it be before we the people get really angry about the real cause of our problems: the government!

June 3, 2008 – Obama nomination victory speech October 5, 2008 – Bush administration passes TARP bill January 25, 2009 – Obama inauguration February 17, 2008 – Obama administration passes second $1-trillion stimulus February 20, 2009 – Rumors of short-term bank nationalization, denied by administration February 23, 2009 – Obama introduces “deficit in half by 1 year” (likely means tax increases) February 25, 2009 – Obama talks to joint session Congress about fixing the economy February 27, 2009 – Omnibus spending package and new budget revealed March 2, 2009 – AIG gets 4th bailout, Feds buy Citibank stock March 4, 2009 – Obama announces Section-8 plan for endangered mortgages March 5, 2009 - Citibank falls below $1/share, healthcare reform talks begin March 10, 2009 – Citibank announces first quarter profit March 12, 2009 – Financial Accounting Standards Board announces mark-to-market change March 18, 2009 – Housing starts report first upward movement in long time March 20, 2009 – Markets miss the memo that the recession is over March 24, 2009 – RTF-like proposal to buy $1-trillion in toxic assets from banks April 2, 2009 – G20 World Finance meeting to contain international money crisis April 3, 2009 – DOW up past 8,000 mark, first time since January April 9, 2009 – First-quarter earnings reports indicate banks made profits April 17, 2009 – California housing prices stable 3 months, Fed says we’ve hit bottom April 24, ‘09 – Q1 bank and retail accounting changes show companies making profits. Apr 29, 09 – Fed says it will continue to interfere with all possible tools to help fix economy Apr 30, 09 – Chrysler announces bankruptcy to qualify for gov’t. bailout money from Fed. May 4, 09 – Bear rally sends market up 300 points apparently due to insider selling. May 5, 09 – Rally continues ahead of Fed “stress test” results for banking industry. May 8, 09 – Fed says biggest banks healthy, just need a little extra capital. Rally continues. May 20, 09 – Q1 retail down, housing starts down. Fed says some signs of improvement. May 22, 09 – US dollar rating may drop. Fed says things may still be a little off. May 29, 09 – USD value drops, oil up, transport and commodities up. GM bankruptcy. Jun 1, 09 – GM declares bankruptcy. Wall Street apparently rejoices. DOW is up! Jun 10, 09 – Feds say rate of decline is slowing, unemployment claims slowing. Jun 12, 09 – Inkspots guitarist Huey Long dies at 105. Analysts predict economic recovery. Jun 22, 09 – FDA takes control of tobacco, Healthcare reform, World Bank worried Jul 9, 09 – Obama ratings dropping, next bailout coming, Michael Jackson dies July 20, 09 – Recession petering out, likely done by Fall. Banks making money like crazy! Jul 23, 09 – Happy Days Are Here Again! 64th US bank closes. Leading indices all up. Aug 7, 09 – Bear market rally continues. Losses everywhere less bad than expected. Aug 13, 09 – Banks, Wall Street, Fed, Ford making money. Unemployment increases Aug 21, 09 – 80 banks fail – 3500 branches, small banks in peril. 13+% mortgages in peril Aug 28, 09 – Unemployment up, FDIC says 400+ banks may fail, retail down, markets rally Sep 2, 09 – Recession is over, green shoots everywhere. Health care for everyone in question. Sep 9, 09 – Institutional traders push rally. Gold over $1,000 Sep 15, 09 – Fed says recession absolutely over. Definitely. For sure. Really! 9700 peak coming Sep 17, 09 – Passing through predicted bear rally peak. All fundamentals down, Wall street up. Sep 22, 09 – High continues, unemployment increases, Wall street ecstatic. Sep 24, 09 – Insiders take profits, DOW springs leak. “Green shoots” everywhere, presumably. Oct 2, 09 – Recession over, banks making money, unemployment higher, no problems! Oct 9, 09 – Alcoa Aluminum singlehandedly saves the US economy. Gold over $1040/oz. Oct 22, 09 – Foreclosures, unemployment up, retail down, 99 banks closed, Wall Street ecstatic Oct 24, 09 – NetFlix shares record high, Wall Street cheers. 106 banks now closed, FDIC broke Oct 30, 09 – US GDP up unexpected 3.5% Banks try to spell “debt,” consumers stop spending Nov 5, 09 – Published Unemployment near 10%, Central Banks exit emergency “largesse” Nov 9, 09 – 0% rates, absolutely no loss Fed guarantees, gold at record $1100 on dollar weakness

12,402 9,955 8,116 7,552 7,365 7,114 7,351 7,063 6,763 6,876 6,595 6,927 7,170 7,487 7,278 7,660 7,978 8,018 8,087 8,131 8,076 8,186 8,168 8,426 8,512 8,575 8,422 8,277 8,500 8,721 8,771 8,799 8,339 8,183 8,848 9,093 9,370 9,398 9,506 9,545 9,281 9,627 9,683 9,784 9,830 9,707 9,484 9,865 10,081 9,972 9,713 10,006 10,227

09 Elections Offer Little News of Value

Pundits and political analysts are going on today about the results of the 2009 “first year” elections, particularly for governor in New Jersey and Virginia. Traditional thinking suggests that the results of these two elections are a referendum, or at least a report card on the president’s first year in office. Some say they foreshadow the next mid-term elections, but the numbers rarely support the idea.

The deeper story, though, is that Tuesday’s election results tell us nothing at all about anything new. That’s if you’re watching the history of America unfold from a philosophic level, rather than simply the political distractions of the day.

We’ve known for a long time that the nation is splitting in half over fundamental ideological differences. It happens that we also have two political parties. The easy conclusion is that the two political parties are causing the ideological split, what with there being two sides in both arenas. In truth, the political parties no longer mean anything at all, it’s the ideologies that are now coming into the spotlight.

For nearly 60 years, philosophers and academics have been trying to remove the meaning of words. The deconstructionist movement has been trying to tell us that nothing means anything, words mean whatever anyone feels they mean, and words have power. They tell us that simply uttering a word “creates” reality, as opposed to describing reality. So too, “republican” or “democrat” presumably cause people to think a particular way. The elections show us that the party names really mean nothing.

Why would we have a category for “independent?” It’s because each and every one of us FIRST develops a view of life, reality, knowledge, truth, falsehood, and so forth. We all of us develop a world-view based on experience, thought, philosophy, history, and everything that we think about and feel. AFTER we’ve built up that construction of existence, we then either get involved in politics or not.

The election results highlight that it’s this individual world-view and philosophy that now matters most to everyone. The division between conservative and liberal (progressive) thinking remains almost exactly what it’s been since the 1990s. What’s changed is that voters are now going to the polls identifying themselves by ideology, not by political party.

Conservatives have been abandoned by the Republican Party in Name Only. There’s no real philosophic or ideological foundation anymore in the GOP. That was okay in the past couple of elections, what with the GOP mostly staying out of the way. Now, with the Republican national leadership having actively promoted liberal ideology in NY 23, they’re not staying out of the way.

The result is that conservatives are released from any political party affiliation; are calling themselves Independents; and there may be a third party thrown into the mix by 2012. That would be a serious problem, and it would be much smarter for conservatives to simply take control entirely of the GOP, throwing out the traditional politicians.

Be that as it may, the only thing that happened with this election was that ideology came to the forefront. We already knew that the nation is almost exactly 50-50 split between conservative and liberal thinking. We’ve known that since the days of Bill Clinton. It’s only the talking heads, pundits and media columnists who still depend on obsolete labels.

America has had half a century of wealth, international power, growth, development, and comfortable living. Nobody has challenged the shining example of individual freedom, capitalism, and creative ingenuity. While we, the people, have been enjoying all that, the politicians have been feeding at the trough of trillions of dollars in consequential tax money.

Bankers have moved in and sucked money out of our pockets, using laws passed (or blocked) by politicians to make gargantuan fortunes. In the process, they’ve wiped out the dollar, crashed the economy, destroyed the future lifestyles of 95% of the population, wrecked the middle class, and brought the world to a standstill.

People have been gradually learning about all this, improving their education since the 1990s. The Internet has given us all the chance to get lots of new information, uncover facts and truths on our own, and we’ve been freed from the monopoly on “news” previously held by the so-called Fourth Estate (aka: mainstream media outlets). That education has led to a return to fundamentals.

What was America based upon when it was created? How did the Founding Fathers attempt to guarantee their vision for the future? In other words, what is America’s mission statement? Those are the questions more and more people are starting to ask. The answers highlight the stunning disregard for the nation our bankers and politicians have gotten away with.

I suppose we could have a name-change campaign, sort of like when AT&T becomes SBC, then goes back to AT&T. Sort of like Midas Muffler changing to the 200,000 Mile Store, or something. We could change Republican to Conservative, or Democrat to Liberal, but who cares? A name is only a name. It’s the meaning behind the name that matters.

The meaning behind the word Republican has vanished. It’s only been the conservatives voting the GOP ticket that has lent any real meaning at all to the party. As such, the GOP is an empty shell, prime for a takeover. It might be a hostile takeover or it could be a friendly takeover. That’s up to the current executive management of the party.

If the GOP leadership chooses to follow the typical Wall Street pattern, they’ll continue to do exactly what they’ve been doing for years: Nothing. They created the problem, and all their goofy solutions are just more of the same. But our vote is like a share of stock in a company. We own as much stock in the GOP as we choose to own, simply by going out and exercising our ballot rights.

When you register to vote, you take ownership of 1 share of stock in America. If you don’t register, you’re just a potential customer for someone selling something. If you register but don’t learn anything about politics, you’re sort of giving someone (lobbyists and marketing companies) your “proxy” so they can tell you how to vote. It all comes down to how many shareholders in America want to exercise their right to control how the country is managed.

All that we learned on Wednesday morning is that the shareholders are pretty clear on their thinking. There are two basic groups, and “management” is clueless. The obvious solution is to get rid of management! At least insofar as the GOP is concerned. After that’s been accomplished comes the larger battle: getting rid of liberalism!