News & Analysis
The Madness of Market Euphoria
Best day of 2012 for Dow industrials and S&P 500 ... U.S. stocks surged Wednesday, with the Dow industrials and S&P 500 both tallying their best day this year, on increasing optimism that central bankers would move to bolster the economy. "It appears the market is under the belief that Uncle Ben and his band of merry makers are going to be coming to the rescue," Bob Pavlik, chief market strategist at Banyan Partners, said of Federal Reserve Chairman Ben Bernanke and other Federal Open Market Committee members. The Dow Jones Industrial Average DJIA +1.05% climbed 286.84 points, or 2.4%, to 12,414.79. The S&P 500 Index SPX +0.99% advanced 29.63 points, or 2.3%, to 1,315.13. The Nasdaq Composite COMP +0.82% added 66.61 points, or 2.4%, to 2,844.72. – MarketWatch
Dominant Social Theme: Happy Days Are Here Again.
Free-Market Analysis: Or are they? Europe is failing, China just cut interest rates and US markets moved up hard on a hope and a prayer.
The hopeful prayer was that Ben Bernanke would cut interest rates – or that he intends to. Why this would cause the Dow to climb some 300 points is mostly a commentary on what markets, US markets especially, have become in the 21st century.
There is, of course, the infamous Washington operated plunge protection team that has taken over from the specialist system in keeping an "orderly market" – which basically means propping it up.
Then there is the Federal Reserve itself, which via unrestrained money printing provides rocket fuel for stock indices that would be far lower without so much easy money sloshing around. Here's a MarketWatch report on what Bernanke said yesterday:
Bernanke: Fed ready to act if stresses escalate ... The Federal Reserve stands ready to act to protect the financial system and the economy in the event that financial stresses from the European crisis escalate, Fed Chief Ben Bernanke said Thursday. In testimony prepared for delivery to the Joint Economic Committee of Congress.
Bernanke stuck to his April forecast that growth will continue at a moderate pace. He said the recovery had been bolstered by consumer spending, as consumers had more money to spend given the drop in gasoline prices. Business caution continued to restrain the economy, he noted.
Bernanke said some of the apparent slowing in economic data, including last Friday's weak jobs number, might be due to unusually warm weather this past winter, which may have brought forward some activity. There have been a few encouraging signs in the housing market, he noted. The Fed's ultra-low interest rate policy is justified given high unemployment, subdued inflation and "the presence of significant downside risks," he said.
To argue, as many do, that the US has a market economy given the amount of regulatory interference, tax manipulations, stock-market interference and money printing, is to argue (at this point) the impossible.
The US is thoroughly in the grip of mercantilism, the process whereby a handful of powerful people manipulate government to create opportunities to advance their own self-interest.
In this case, the manipulators are what we call a power elite and the main mechanism of manipulation is the central bank. By expanding and contracting the money spigot, the powers-that-be can surely control the larger marketplace, especially the stock market.
The elites utilize dominant social themes to reinforce central banking Money Power. The ultimate goal of these elites is world government and they disseminate fear-based promotions to frighten people into giving up power and wealth to cleverly positioned globalist facilities such as the United Nations.
The stock market dominant social theme is an especially powerful one. First, the modern market involves many people and much of their wealth including retirement funds. So people have an enormous emotional investment in the marketplace as it is.
The elites – having created the system – understand this and use the specter of marketplace failure as a kind of bogeyman to reinforce loyalty to the current system. People are afraid to demand substantive change because they have too much to lose.
Of course, in the 21st century, people have already lost a great deal. We have postulated that the powers-that-be are not averse to these losses because there is an intention to create a global money and in order to do so, the world's larger economy must be destabilized, including stock markets.
Does a small group of people have so much power? We would argue via their apparent control of central banking that they do. It is a situation both serious and sad when a few apparent dynastic families have a choke hold over whole economies and their activities.
But control of central banks also leads to control of banking itself, financial markets and general industry as well. The entire industrial might of the Western world when examined this way provides us with the insight that power is a good deal more concentrated than we are led to believe.
And when it comes to the modern market, especially the stock market, power is evidently and obviously concentrated in a few hands. Machine trading tends to dominate on a regular basis in terms of volume, while the secretive plunge protection team operates from the sidelines.
The most power is concentrated in the hands of central bankers that produce the monetary rocket fuel that powers markets up and, sometimes, down.
We can see once again, the power that central bankers have over markets in this gigantic upward move. Stock markets in both the short and long term are playthings of the power elite.
It is true (see other article this issue) that private investments in gold and non-public companies may offer a better and less controlled environment for investors. But when it comes to larger, tradable entities, there is no doubt that they are subject to the various vagaries of power elite control.
Conclusion: The idea of "investing for the long term" ought to be examined within the larger context of this elite leadership. One's financial life (from a public market standpoint) is far more at the mercy of powerful and willful forces than it might seem.